TEXT  BOOK 

OF 

CALIFORNIA 

WATER  AND  POWER 

ACT 


This  Copy  No.    196 

is  loaned  to 


For  his  personal  use 
To  be  returned  upon  request 

to 


THE  GREATER  CALIFORNIA  LEAGUE 


620  Phelan  Building 
San  Francisco 


CtG,l 

CuNTE' 

Page 

1.  What  is  the  California  Water  &  Power  Act  and  what 

does  it  mean  (for  copy  of  act  see  insert  pamphlet 
herev/ith)  1 

2.  FACTS  ABOUT  ONTARIO 

Ontario  Hydro's  Construction  Costs    6 

How  do  the  Water  Power  Resources  of  Ontario 

Compare  with  California?   13 

What  about  Rates  Charged  in  Small  Co..  .unities 

in  Ontario,  Canada?   14 

What  of  the  Economic  Accomplishments  in 

Ontario.  Canada?  16 

California's  Growth  in  Population  Compared  to 

Ontario,  Canada's  Growth   18 

What  will  Become  of  our  Rural  Population? 19 

What  of  Prosperity  on  the  Farms  under  the  Hydro 
Electric  C      ion  of  Ontario  as  Compared  with 

lifornia's  Initiative  in  Power  Service?    ....    20 

Shall  we  Introduce  a  Philosophy  that  Leads 

toward  Stagnation?   23 

Is  the  Murray  Report  Reliaole 24 

COMPARISON  OP  CALIFORNIA  RAT?/,  WITH  ONTARIO  RATES 

Rate  Comparisons  between  California  and  Ontario   .  . 

Where  tbe  Money  Goes  in  Hydroelectric  Development 

Californir   , 30 

4.   COMPARISON  OF  RATES 

Comparison  of  Rural  Power  Coots   32 

What  about  the  Coct  of  Power  to  the  Ultimate 

Consumer  in  California?   34 

What  of  Average  Power  Rc.tes  for  Various  Cities 

of  California?    36 


1 


I. 


Page 

5.  GROWTH  OF  CALI7CRBXA 

Comparison  of  St     iC3  from  the  Last  United 

Census  Reports  on  Electric  Plant3   38 

The  Water  and  Power  Act  near,        tion  of  industry      41 

6,  INDEFINITENESS  OF  THE  PLAIT  OUTLINES  BY  THE  WATER  - 
POWER  ACT. 

The  Water  and  Power  Act  fails  to  locate  or  describe 
projects 44 

The  Water  and  Power  Act  is  absolutely  silent  as  to 

Plan  or  Polic     45 

7-   FOLLY  OF  POWER  AT  COST 

Does  it  benefit  ratepayers  to  pay  off  the  capital 

invested  in  public  utility  service?   46 

8.  CONSERVATION  OF  NATURAL  RESOURCES 

Do  the  Private  Pov/er  Companies  Despoil  the  Natural 
Resources  of  California?   50 

9.  IMPORTANCE  OF  SCUND  REGULATION  AS  OPPOSED  TO  POPULAR 
REGULATIO:  . 

Importance  of  Sound  Regulation  as  Opposed  to  Popul 
Regulation 52 

The  Powers  and  Duties  01  the  California  Railroad 
Commission 55 

Are  the  Utility  Companies  Guaranteed  an  8  Per  Cent 

Return  under  Regulation?    56 

10.  MEANING  OF  THE  WATER  AND  POV/ER  ACT 

Effect  of  Water  and  Power  Act  on  Taxes 57 

11.  RESUME  OF  POSSIBLE  RESULTS  UNDER  THE  WATER  AND  POWER 
ACT  IF  ADOPTED. 

Here  is  Where  the  Philosophy  of  Those  Who  Fftvor  the 

Proposed  Water  and  Power  Act  in  California  Vill 

Lead  us  Should  it  be  Adopted.   Let  us  Beware   ...   60 


II. 


Page 

12.  TAX  SITUATION 

The  "Tax-exempt"  Farce   62 

Taxes  in  California 63 

Municipal  Ownership  and  Taxes  in  Los  Angeles  ...    65 
Effect  of  Water  >..nd  Power  Act  on  Taxes   ....    66 

13.  COMPARE  THE  GROWTH  IN  LOS  ANGELES  WITH  THE  GROWTH  E 
THE  BAY  REGION. 

What  Proponents  of  the  Proposed  Water  and  Pover  Act 

Say  Regarding  the  City  Water  and  Power  for  Los 

Angeles 68 

14.  CONSTRUCTIVE  ARGUMENT  FOR  THE  INTELLIGENT 

Power  Development  in  the  Stcte  Has  Kept  up  with  the 
Demands 71 

What  ahout  the  Power  Shortage  in  California?  73 

California's  Magnificent  Attainment  in  Hydroelectric 
Development 77 

Granting  All  that  the  Proponents  of  the  Act  Cla. 

What  Will  toe  the  Saving  Per  Capita  to  the  People  of 

the  State? 79 

How  Will  the  Financing  Contemplated  Affect  the 

Credit  of  the  State? 8l 

15.  WHY  GOVERNMENT  FAILS  IN  BUSINESS 

Government  Failures  in  Business  —  Canadian  Railways   83 
North  Dakota  and  What  Happened 85 

16.  WHY  IT  IS  IMFORTANT  TO  PRESER7E  THE  INITIATIVE  AND 
SELF  RELIANCE  OF  THE  PEOPLE  BY  AVOIDING  PATERNALISTIC 
GOVERNMENT. 

Why  is  it  Imortant  to  Preserve  the  Initiative  and 

Self -Reliance  of  the  People? 88 

17.  THE  STATE  OF  CALIFORNIA  CREDIT  AND  THE  EFFECT  OF  THE 
WATER  AND  POWER  BILL  UFON  THE  CREDIT  OF  THE  STATE, 
THE  LOANABLE  VALUE  OF  LAND,  AND  INTEiJlST  RATES. 


III. 


Page 

Shall  v/e  Suffer  o      te  Credit  to  be  Jeopardized?    89 

Effect  of  the  Wa-cor  arr1  Power  Act  en  the  borrowing 
power  of  the  individual  manufacturer ,  merchant, 

rmer  and  land  owner 91 

18.  THE  INVESTMENTS  MADE  IN  CALIFORNIA  IN  THE  PUBLIC 
UTILITY  INDUSTRY  SINCE  REGULATION  CAME  INTO  BEING 
WITH  PARTICULAR  REFERENCE  TO      IMMORALITY  OF 
ATTACKING  SUCH  INVESTMENTS ,  ETC . 

Competition  versus  regulated  Monopoly 93 

19.  ANSWERS  TO  THE  VARIOUS  SPECIOUS  ARGUMENTS  OF  BARTLETT, 
PORTER,  AND  THE  LIKE. 

Prosperity  and  growth  in  Los  Angeles  not  attributable 

to  municipally  owned  power   96 

Municipal  Ownership  in  Los  Angeles   99 

Comparison  of  the  cost  of  Electric  Service  in  Los 
Angeles  £.n      Francisco.  101 

What  authority  has  the  Committee 108 

20.  ACCOMPLISHMENTS  OF  THE  POWER  INDUSTRY  IN  CALIFORNIA 
UNDER  PRIVATE  MANAGEMENT. 

California's  Present  Hydroelectric  Achievements 
Recognized  the  World  Over Ill 

21.  DISTINCTION      CEN  WATER  WOHKB  BUSINESS,  WHICH  IS 
OLDER  THAN  ROME,  AND  THE  ELECTRIC  BUSINESS,  WHTCH 
IS  A  MANUFACTURING  BUSDQ6SS  AND  ]     THAN  THIRTY 
YEARS  OLD  WITH  CHANGES  COMING  RAPIDLY. 

The  Water  and  Power  Act  Contemplates  not  Government 
Ownership  but  Government  in  Business 112 

22.  PORTER'S  ARGUMENT  THAT  THE  U.  S.  A.  IS  THE  MOST 
BACKWARD  OF  ALL  COUNTRIES,  THAT  OTHER  COUNTRIES  HAVE 
ATTEMFTED  REGULATION  AND  PASSED  FROM  THAT  TO  GOVERN- 
MENT OWNERSHIP. 

What  abort  tl;e  So-called  Municipal  Power  Plant  of 
Alameda? 113 

What  about  the  So-called  Municipal  Fo*er  I    1  of 
Riverside? 115 


'.'. 


Page 

What  abcut  the  Power  Plant  of  Los  Angeles?   .   .   .   117 

Should  California  Imitate  the  Bureaucratic 

Governments  of  Europe? 122 

The  Tale  of  the  Tail  of  a  Cor..     123 

An  example  of  Deliberate  Dishonesty   125 

23.  SUMMARIZATION  OP  MR.  SI3LEY'S  ARTICLES  SO  FAR  A3  NOT 
COVERED  UNDER  ANY  OF  THE  ABOVE  HEADS. 

Regarding  Mythical  Savings   128 

California  Has  Never  Had  the  Condition  that  Prevail- 
ed in  Ontario  to  Call  for  the  Formation  of  a  Hydro 
Commission 13C 

A  V/ell  Known  Pitfall  in  Spending  the  People's  Money   132 

24.  ARGUMENTS  FOR  THE  IRRIGATIONIST . 

How  Will  the  Proposed  Act  Affect  Irrigation?   .   .   .  135 

2^.      THE  KETCH  HETCHY  SITUATION. 

Is  State  Aid  Available  for  Completing  Hetch-Ketchy?   137 

26.  LACK  OF  INFORMATION  AS  TO  WHAT  PROJECTS  WILL  BE 
DEVELOPED,  ETC. 

Who  Pays  the  Losses? 140 

27.  FAT  TERRITORY  MUST  CARRY  LEaN  TERRITORY. 

Why  Fat  Territory  Must  Carry  Lean  Territory   .   •    141 

28.  MISCELLANEOUS  COMMENTS. 

Did  the  Railroad  Commission  Ever  Recommend  That 

the  State  Go  in  the  Power  Business? 142 

Comments  by  Edward  F.  Adams 146 


V. 


INDEX 

A 

Adam^,   Edw.    F. Comments  by  146 

Alameda 

nicipa?.  Plant  113 

Power  Rates  36 

Analysis  of  F     ~oets  31 

Authority  of  Finance  Committee  Under  Act  108 

•rage  Power  Iiates--Cities  of  California  36 

B 

Bank,  Board  May  Start  3 

Beck,  Sir  Adam  Answsrcd  25 

Berkeley,  Mfg.  Growth  Compared  to  L.A.  68 

Board,  Powers  of  2 

Bond, Issues,  Four  Times  Present  Debt  2 

Bonded  Debt  of  State  82 

Bonds  for  Operating  Expense  ^ 

Borrowing  Power  Injured  43 

Building  Permits,  Calif,  vs.  Ontario  23 

Bureaucratic  Systems  of  Europe,  Initiation  of  122 

C 
California 

Better  Conditions  than  Ontario  16 

Building  Penult 3  23 
Compared  toOutario(See  also  Prntd  Inst )13, 14, 16,27,  34,  89,   129 

Conditions  Do  Not  ITeed  Improvement  1}0 

-m  Prosperity  20 

K      turing  Statistics  17 

Population  Statistics  lo 

Power  Bill  Savings  Since  1908  129 
Rates  Compared  to  Ontario                            27,  34 

Rural  Population  19 

Savings  Deposits  90 

Canadian  Railway  Failure  83 

ital  Amortized  in  50  Years  48 

VI. 


Capitalizing  Operating  Expense  119 

Census  on  Municipal  vs.  Private  Plants  38,  40 

Cities  of  California,  Average  Power  Rated  3° 

City  Rate3,  Ontario  vs.  California  29 

Civil  Service 

Disregard  of  147 

Ignored  2 

imcroial  vs.  Municipal  Plants  38>  40 

Committee,  Under  Act,  Authority  of  108 

Comparison 

Ontario-Calif ornia( See  also  Printed  Insert )13, 14, 16,27,34, 89, 129 

With  Municipal  Rates  Difficult  Ho 

Competition  Reintroduced  Under  Act  42 

Competition  vs.  Regulation  93 

Confiscation  of  Property  3 

Consequences  of  Act  Summarized  6° 

Constitutional  Amendment  1 

Construction  Costs  High  ° 

Cost  of  Government,  California  63 

Cost  of  Power,  California  3° 

Costs  of  Power,  L.A.  and  S.F.  101 

Credit  of  Individual  Affected  91 

Credit  of  State 

How  Affected  81 

Jeopardized  89 

D 

Dishonest  Propaganda  125 

Distance  Basis  of  Ontario  Rates  1*  27 

Distribution,  Share  in  Power  Costs  31 

Drury,  Commissioner  Quoted  6,132 

VII. 


Duties  and  Power  of  P..R.  Commission  55 

E 

Eight  Per  Cent  Guarantee  Fallacy  56 

Election  Necessary  to  Repeal  1 

Employment  Without  Civil  Service  2 

Engineering  Records — Private  Companies  52 

Europe,  Shall  We  Imitate  it  122 

F 

"Facts  for  Farmers "--Alleged  Misquotation  123 

Farm,  Use  of  Electricity  in  California  32 

Farm  Development,  Ontario  va.  California  19,20 

Farm  Rates 

California  vs.  Ontario  32 

Ontario  vs.  Calif.  29 

Farmer , 

Borrowing  Power  Affected  91 

Irrigation  Affected  135 

Farming  District,  Danger  to  3 

Farming  Interests,  High  Rate  4 

Fat  Territory  Carries  Lean  Territory  141 

Finance  Unsound  3 

Five  Million  Not  Enough  4 

Flood,  Statement  of,  on  Report  25 

G 

Goodyear  Tire  Co.  in  L.A.  97 

Government  Costs,  Calif.  63 
Government  Failures  in  Business                         83  ,85 

Government  in  Business,  Danger  of  112 

Government  Ownership  Not  Contemplated  112 

VIII. 


Hetch  Hetchy,  Possibility  of  State  Aid  138 

h  Construction  Costs  6 

Hom-2  Pates,  Ontario  vs.  Cr.lif.  29 

Hoover  on  California  Companies  HI 

Household  Rates  Unreasonably  Lov;  in  Ontario  27 

I 
Indefinite  Character  of  Act  44  ,45 

Indirect  Taxation,  Principle  of  63 

Industrial  Stagnation  Under  Act  41 

Interest,  Taxation  to  Provide  for  2 

Interest  Rates  on  Ontario  Bonds  89 

Investors  Discouraged  42 

Irrigation,  How  Affected  135 

L 

Land  Owner,  Borrowing  Power  Affected  91 

Legislature,  No  Control  2 
Less  Not  More  Government  Needed 
Load  Factor  Not  Considered 


64 

28 


63 


Los  Angeles 

Arguments  Refuted 

•gures  of  Municipal  Ownership  99 

Growth  Not  Due  to  Municipal  Ownership  9o 

Manufactures  Compared  to  Bay  Counties  O 

nip  and  Taxes  "5 

Municipal  Plant  }*/ 
Power  Rates                                    3°  .37  .120 

Vs.  San  Trancisco--Co3ts  of  Electricity  101 


Losses,  Who  Pays  Them?  1*° 

Lowest  Rates  in  California  ?1 


IX. 


Manufacturer 

Borrowing  Power  Affected  91 

to  144 

Dangers  to  2 

Manufacturing  Costs  cf  California  Power  30 

ManuJ  -         rowth  i.n  Calif,  Cities  69 

-lufacturing  Per.:r.  itcd  2 

Manufacturing  Under  Govt.  Ownership  17 

Merchant,  Borrowing  Power  Affected  91 

Misquotation  Denied- -"Facts  for  Farmers"  123 

Municipal  Bookkeeping,  Vagaries  of  l?-7 

Municipal  Ownership,  Los  Argeles  96,, 11? 

Municipal  Ownership  and  Taxes,  Lcs  Angeles  65 

Municipal  Plant 

-ineda  113 

Los  Angeles  117 

Riverside  115 

Municipal  vs.  Private  Plants  38, .40 

Municipal  vs.  Private  Power  Rates  36,120 

Murray  Report  Reliable  24 

Murray,  Statement  of,  on  Report  25 

Mythical  Savings  in  Ontario  128 

1 

Natural  Resources  Corserved  by  Private  Companies  50 

Niagara—Advantages  of  Ontario  13 

Niagara  Rates  not  Jharaoteris*ic  27 

Non-Partisan  Experiment  in  North  Dakota  85 

Non-Partisan  Party  Endor     et  86 

North  Dakota 

Failure  85 

Similarity  to  Bank  Experiment  3 

X. 


Ontario 

Building  Permits 

Compared  with  California 

Construction  Costs 

Cost  of  Farm  Power 

Drury  Statement 

Economic  Situation 

Farm  Prosperity 

Farm  Rate 3 

High  Rates 

Interest  on  Bonds 

Loss  in  Operation 

Manufacturing  Statistics 

Need  Greater  than  Calif. 

Population  Statistics 

Power  Bill  Savings  Less  Than  Calif. 

Rate  Comparisons 

Rates  in  Small  Communities 

Rural  Population 

Saving  Deposits 

Steam  Hot  Required 

Toronto  Daily  Star  Quoted 

Transmission  Short 

Water  Power  Resources 


23 

13,14,16,27.34,89.12? 

4 

6 
16 
20 

32 

11 

89 
11 

17 
:3 

128 
27.  3* 

14 

19 
90 

13 
132 

13 

13 


People's  Money  Easily  Spent 

Per  Capita  Saving  Under  Act 

Plan  Unspecified 

Political  Chicanery,  Opportunity  for 

Population--Ontario  vs.  California 

Power  at  Cost  Fallacy 

Power  Companies  Giving  Adequate  Service 

Power  Company  Achievements  Recognized 

Power  Development  Demands 

Power  Rates--Cities  of  California 

Power  Shortage,  Explanation  of 

Power  Users  Bear  Ontario  Burden 

Powers  and  Duties  of  R.R.  Cowmi3sion 


133 
79 
*5 

3 
18 

.4, 141 

5 

in 

71 
36 
73 
27 
55 


::i. 


Powers  of  Board  2 

Present  Conditions  Satisfactory  5 

Private  Initiative  Important  88 

Private  Power  Companies  Conserve  Natural  Resources  50 

Projects  Not  Described  44 

Prosperity,  Confiscation  of  3 

Provisions  of  Act  2 

Public  Debt,  Calif,  63 

R 

Railroad  Commission 

Did  Not  Recommend  Govt.  Ownership  142 

Does  Not  Guarantee  Q%  5° 

Misquoted  by  Proponents  125 

Not  Under  Supervision  of  3*  27 

On  Post  War  Rates  75 

Powers  and  Duties  55 

TkrL  t  P  ^ 

California  vs.   Ontario (See  also  Printed   Insert )27, 28, 29 1    34 

For  Power,    Cities  of  California  3g 

High  Because  Investment  Amortized  40 

High  in  Ontario  H 

InSmall  Communities  High  14 
L03  Angeles                                                                                          37.120 

To  Ultimate  Consumer  33 

Unsupervised  3 

Record  Use  of  Power   in  California  71 

Records  by  Private  Companies  52 

Records  in  Hydroelectric  Development                             •  77 

Regulation,    Sound  vs.   Unsound  52 

Regulation  vs.  Competition  93 

Riverside  Municipal  Plant  H5 

Rural  Population,   Ontario  vs.  California  19 


XII. 


s 

San  Francisco,  Assistance  for  He ten  Hetchy  13$ 

San  Francisco  vs.  L03  Angeles,  Costs  of  Electricity  101 

Savings  Deposits,  Calif,  vs.  Ontario  90 

Saving  Per  Capita  Under  Act  79 

Seavey,  Clyde,  Refuted  10$ 

Sectional  Interests  Served  *7 

Security  Holders  Imperilled  94 

Shortage  of  Power,  Explanation  of  73 

Small  Communities,  Ontai -    * es  *4 

Small  Town  Rates--Ontario  va.  Calif.  29 

Sound  vs.  Unsound  Regulation  52 

Spreckels,  Rudolph,  Answered  93 

Steam  Plants,  Necessary  in  Calif.  ^3 

Steam  Standby,  Share  in  Power  Costs  31 

Summary  of  Consequences  of  Act  60 

Supergovernment--Provisions  of  Act  2 

T 
Tax  Free  Securities 
Tax  Free  Securities  and  Taxes 
Tax  Free  Securities,  Menace  of 
Taxation  Increased 


62 

58 

4 

Taxation  to  Pay  Interest  2,  3 

Taxes  and  Municipal  Ownership  in  L.A.  "5 

Taxes  and  Tax  Free  Securities  62 

Taxes 

Effect  of  Act  on 
In  California 


57,  66 
63 

Paid  by  Alameda  Plant  1J* 

Paid  by  Public  Utilities  &7 

Share  in  Power  Costs  31 

XIII. 


Taxing  Power,  Provi  -ions  of  Act  2 

Text  of  Bill  (Printed  Insert)  4 

Toronto  Daily  Star  Quoted  *32 

Trai 

QiA.iio   vs.  California  13 

1  Power  Costs  31 

U 

Ultimate  Consumer,  Rates  to  3* 

V 

Vernon  and  Torrence  Gro\:t:.  Compared  to  L.A.  97 

W 

Water  and  Power  Bill--Text  (See  Printed  Insert)  4 

Water  Resources,  Confiscation  of  3 

What  it  is  1 

Whole  State  Not  Served  * 

Wholesale  Rates  Given  in  Ontario  28 


•  oOo- 


XIV. 


BREAKING  A  WORLD'S  RECORD  IN  CALIFORNIA 

KuiIiIiiik  the  towcra  for  220,000- Mil  I  tranamiaaion.  I  ndrr  Ihr  alimulua  of  pmatr  ownership  in  California,  Ire- 
mcndou*  engineering  feat*  in  Ihr  dr\rlopmrnt  of  power  have  been  acromplmhed.  until  thia  »lalr  no!  onl»  rank* 
IfaJ  in  ila  nae  el  i  l.ciriritv  on  Ihr  farm  and  in  Ihr  average  low  ratr  for  power,  hut  in  the  aaeeca  a»  well  for  thooe 
I  mm  all  part*  ol  ihr  wnrld  who  arr  inlrrr«trd  in  Ihr  prnhlrm*  of  high  voltage  tranamiaaion.  In  Ihi*  «late  the 
limenl  In  Ions  distance  tranamiaaion  of  power  w«»  worked  out  and  toda>  the  world'a  record  in  ihu  n>ld 
i»  held  hrr.  I  n  are  no  reporta  available  of  pioneering  work  of  thia  character  which  haa  been  aceoaaa' 
under  government  VMMlB|  in  an>   dt»lrirt  of  the  I  nilr  I   Mate*. 

Reprint  from  the  Journal  of  Electricity  and  Western  Industry 


What  is  the  California  Water  a. id  Pov/or  Act  and  What  does  it  mean? 

This  Act  is  proposed  as  an  amendment  to  California's 
constitution,  and  has  "been  placed  upon  the  ballot  for  next 
November's  election  by  initiative  petition.    If  adopted,  the  Act 
"becomes  a  part  of  the  supreme  law  of  the  state.    Its  provisions 
are,  therefore,  beyond  legislative  control  and  cannot  "be  amended 
in  whole  or  in  part  except  "by  another  initiative  "by  the  people, 

submitted  at  another  election. 

The  proposal,  then,  is  not  so  simple  a  thing  as  an  act 
which  can  be  amended  at  any  time  but  a  constitutional  amendment. 
No  natter  how  disastrous  or  dangerous  any  of  the  provisions  may 
prove  to  be,  the  legislature  is  powerless  to  act.   Nothing  can  be 

done  to  "put  out  the  fire",  until  an  election  is  held  and  the 
people  vote  to  amend  or  repeal . 

The  main  purpose  of  the  measure  is  to  launch  the  state 
in  the  business  of  generating  and  selling  electric  power. 

Let  U3  forget  all  about  the  question  of  whether  a  polit- 
ical board,  without  experience  or  technical  requirements,  can 
safely  be  given  supreme  power  over  the  finance,  management  and 
operation  of  one  of  the  most  intricate  and  technical  industries 
known,  one  which  is  yet  in  its  infancy  and  which  need3  the  very 
highest  type  of  engineering  skill  and  management  in  its  future 
development  and  confine  ourselves  solely  to  the  single  query 
whether  the  act  is  so  wisely  conceived  and  free  from  dangerous 

and  unsound  provisions  as  to  warrant  its  becoming  a  part  of  the 
constitution. 

This  question  can  best  be  answered  by  considering  what 

the  act  does,  what  the  so-called  Water  and  Power  Board  can  do, 

what  the  financial  policy  of  the  Act  is  and  what  its  effect  on 

taxation  will  be: 

-  1  - 


WHAT  THE  ACT  DOES 

1.  It  creates  immediately  on  adoption  a  new  State  bond 
issue  of  $500,000,000.00,  and  pledges  the  full  faith  and  credit  of 
the  state  to  the  payment  thereof,  thereby  mortgaging  every  piece 
of  taxable  reel  and  personal  property  as  security  for  the  payment 
of  the  principal  and  interest  of  these  bonds.   This  new  issue  is 
over  four  times  the  present  total  of  our  AUTHORIZED  state  bond 
issues  and  nearly  eight  times  the  present  total  of  our  actual  state 
bonded  deut.   (Sec.  5) 

2.  It  creates  a  "California  Water  and  Power  Board",  and 
places  the  expenditure  of  this  money  in  the  hands  of  a  quorum  of 
three  out  of  the  Board's  five  members,  appointed  by  the  Governor, 
with  full  power  and  authority  to  spend  the  money  anywhere  they 
wish,  any  time  they  wish  and  in  any  way  they  wish,  either  in  or 
out  of  the  State,  without  review,  revision  or  control  by  any  legis- 
lative, executive  or  other  department  of  the  state  government.  Ho 
projects  are  described  or  specified  in  the  act  and  the  Board's  re- 
quisition for  the  sale  of  bonds  for  projects  which  it  hereafter 
approves  is  controlling.   The  board  is,  in  truth,  a  super-govern- 
ment.  (See.  7) 

3.  It  contains  (l)  an  express  and  continuing  ANNUAL 
appropriation  from  the  general  fund  of  the  State  of  such  sum  as 
may  be  needed  to  pay  the  principal  and  interest  of  the  $500 ,000, 
000.00  of  bonds;  (2)  a  direction  that  there  be  collected  ANNUALLY 
in  the  same  manner  as  other  taxes  are  collected  such  ADDITIONAL 
sum  as  may  be  necessary  to  meet  the  appropriation  for  principal 
and  interest  of  the  bonds,  and  (3)  a  mandate  to  the  fiscal  officers 
of  the  State  to  levy  and  collect  these  additional  taxes.   (Sec.  9) 
This  is  a  permanent  appropriation  by  a  CONSTITUTIONAL  enactment 
beyond  legislative  control. 

WHAT  THE  BOARD  CAN  DO 


1.  Employ  as  many  engineers,  legal  advisers,  superin- 
tendents, supervisors,  foremen,  bookkeepers ,  stenographers  and 
other  employees  and  pay  such  salaries  as  it  may  determine  without 
regard  to  present  Civil  Service  rules  and  regulations.   (Sec.  3»J* 
Here  is  the  germ  of  a  political  machine,  which  is  bound  to  grow 
and  multiply. 

2.  Manufacture  or  otherwise  acquire  any  materials,  RAW 
OR  FINISHED,  used  in  the  power  industry,  which  means  that  the 
Board  may  engage  in  ANY  business,  -  cement  manufacturing,  copper 

ning,  and  smelting,  oil  production,  railroading,  retailing,  dis- 
tributing, etc.   (Sec.  3»  a  &  b) 

3.  Take  out  of  the  State  Treasury  WITHOUT  CONSENT  of 
the  Legislature  or  Governor  any  amount  of  money  needed  to  pay 
principal  and  interest  of  the  $500,000,000.00.   The  Act  compels 

-  2  - 


the  return  of  such  withdrawals  from  the  State  Treasury  "by  the  levy 
and  collection  of  additional  taxes.   (Sec.  9) 

4.  Fix  rates  for  electric  service  without  a  hearing, 
change  rates  at  will  and  prescribe  the  terms  of  contracts  for 
electric  service.   (Sees.  3  c  &  8)   There  is  no  provision  for 
review,  control  or  regulation.   The  Board  is  supreme. 

5-   Take  away  from  any  CITY,  FARMING  COMMUNITY  or  WATER 
DISTRICT  its  undeveloped  water  and  power  resources,  if  they  are 
not  developed  within  two  years  after  notice  from  the  Board.  (Secl3) 

6.  Spend  all  or  any  part  of  the  $500,000,000.00  outside 
the  State  of  California,  if,  in  the  opinion  of  the  Board,  it  may 
be  necessary  or  convenient.   (Sec.  3  f  &  g) 

7.  Start  its  own  bank,  as  money  derived  from  the  sale 
of  bonds  DOES  NOT  HAVE  TO  BE  paid  into  the  State  treasury.   A 

alar  experiment  in  North  Dakota  resulted  in  the  failure  of  28 
banks.   (Sec.  9) 

8.  Take  possession  IMMEDIATELY  of  any  property  it  de- 
sires.  The  Board  act3  as  judge  and  jury  in  its  own  case  and  by 
this  AUTOCRATIC  AUTHORITY  makes  the  ownership  of  any  property 
UNSAFE.    (Sec.  14) 


UNSOUND  FINANCE  AND  POLICY 


1.  Section  7  permits  the  proceeds  of  bonds  to  be  sold 
for  the  OPERATION  and  MAINTENANCE  of  such  projects  as  the  Board 
may  deem  necessary  or  convenient,  etc.   This  is  just  as  unsound 
as  issuing  bonds  for  roads  which  wear  out  before  the  bonds  are  paid. 

2.  Section  7  also  provides  that  "in  order  to  avoid  ap- 
propriations from  the  general  fund  and  resulting  taxation"  NEW 
bonds  may  be  issued  and  sold  to  pay  either  INTEREST  or  principal 
of  old  bonds  outstanding.   Taxation  is  not  avoided  by  pyramiding 
the  State's  indebtedness,  or  by  paying  INTEREST  with  more  bonds. 

3.  Section  7  also  creates  a  revolving  fund  of  $5»000, 
000.00  and  places  it  at  the  disposal  of  the  Beard.   This  fund 
could  be  used  to  conceal  a  thousand  blunders  and  opens  the  door  to 
all  sorts  of  illegitimate  practices  to  avoid  disclosures  of  fail- 
ures and  mistake 

4.  The  Act,  as  a  whole,  takes  away  from  the  people  any 
voice  as  to  when,  where,  or  how  proposed  projects  shall  be  develop- 
ed by  the  Board,  the  sice  of  the  districts  to  be  served  by  it,  the 
rates  to  be  charged  or  terms  of  the  contracts  under  which  districts 
or  communities  are  to  be  serve     The  people  are  to  be  suppliants 
before  a  political  board. 

5.  If  the  State  is  to  go  into  the  power  business,  the 
only  logical  course  is  for  the  State  to  undertake  to  serve  the 

-  3  - 


entire  Stt.te.   The  bond  i~sue  of  $500,000,000,00  is  not  nearly 
large  enough  to  permit  service:  to  the  whole  State.   In  fact,  the 
Act  i3  drafted  so  that  only  portions  of  the  State  can  be  served 
and  those  are  to  be  the  portions  selected  by  the  Board.   But  AIL 
the  taxable  property  in  the  State  is  liable  for  the  bills. 

6.   The  Act  provides  that  State  power  shall  be  sold  "at 
cost",  as  that  term  is  defined  in  the  Act.   "Power  at  Cost"  for 
rural  agricultural  and  thinly  populated  districts  is  an  impossibil- 
ity.   The  "fat"  territories  must  help  to  carry  the  "lean"  terri- 
tories.  Agricultural  power  is  sold  in  California  way  below  its 
cost.   If  it  were  not,  agriculture  could  not  use  anywhere  near 
the  amount  of  power  it  now  uses  in  California.    "Power  at  cost" 
was  tried  by  the  Province-owned  Hydro-Electric  Commission  of 
Ontario.   After  twelve  years,  less  than  one  per  cent  of  the  power 
developed  was  used  by  agriculture  because  the  cost  was  prohibitive 
for  agriculture.    This  was  the  finding  of  a  Legislative  investi- 
gating committee  of  the  Ontario  Assembly  under  date  of  November  30, 
1920.   The  result  of  the  committee's  report  was  the  adoption  of 
the  Rural  Hydro-Electric  Distribution  Act,  1921,  whereby  a  bonus 
of  fifty  per  cent  was  granted  for  power  service  in  rural  districts. 
The  bonus  is  taken  out  of  the  Consolidated  Revenue  Fund  of  the 
Province. 

EFFECT  ON  TAXES 


1.  The  bonds  issued  under  this  Act  will  be  tax-free 
securities;  their  proceeds  will  be  used  to  buy  property,  which  at 
once  becomes  tax-exempt  and  is  removed  from  the  tax  rolls;  the 
expenses  of  government  go  on  just  the  same;  the  result  is  increas- 
ed taxe3  because  there  is  less  taxable  property  to  meet  the  ex- 
penses of  government. 

2.  The  taxpayer  must  carry  an  additional  burden,  while 
the  Board  is  "getting  started",  using  its  $5,000,000.00  revolving 
fund  and  attempting  to  establish  a  r^oing  and  paying  business. 
Thereafter,  the  taxpayer  is  the  guarantor  of  the  skill,  intelli- 
gence and  judgment  of  the  Board  and  its  unknown  technical  staff 
and  organization. 

CONCLUSION 
There  wa3  no  public  demand  for  this  Act;  it  has  been  put 
on  the  ballot  by  a  small  group  who  financed  the  solicitation  of 
signatures  at  ten  or  twelve  cents  a  name;  it  has  been  drafted  with- 
out opportunity  for  legislative  discussion  or  other  debate  as  to 
its  terri3  and  represents  the  judgment  of  a  small  coterie,  untested 
by  the  criticisms  of  others;  tax-free  securities  are  good  things 

-  4  - 


for  the  rich,  but  they  are  increasing  the  tax  burden  of  most  of  us 
and  it  seems  wi3e  to  call  a  halt  on  the  issuance  of  such  securi- 
ties unless  they  are  absolutely  necessary  or  their  issuance  is  a 
duty;  there  is  no  shortage  of  power  in  California  and  no  danger  of 
one;  power  is  cheaper  in  California  than  anywhere  else  in  the 
country;  there  is  a  greater  development  of  hydro-electric  power 
here  than  in  any  other  state  and  a  greater  per  capita  consumption; 
the  power  companies  in  California  have  been  leaders  in  electrical 
achievements;  they  are  operating  with  a  lively  sense  of  their 
public  responsibilities  and  under  the  strictest  regulation;  their 
credit  is  good  and  money  is  readily  available  to  them  for  their 
developments.   Why  then  disturb  a  situation,  which  is  a  very  good 
one,  by  issuing  more  tax-free  bonds  to  increase  taxes  and  by 
adopting  a  constitutional  amendment  which  not  only  fails  to  pro- 
vide a  state-wide  service  but  contains  many  unsound,  unwise  and 
dangerous  provisions? 


-  5  - 


OKTARIO  HYTRO'S  CONSTRUCTION  COSTS 

Whether  power  is  developed  by  government  or  by  pri- 
vate corporations  it  cannot  be  sold  permanently  below  cost  with- 
out causing  deficits  and  failure.   And  whether  power  be  devel- 
oped by  government  or  by  private  corporations  the  work  is  done 
on  borrowed  money  and  must  pay  interest  on  the  investment  as 
part  of  the  cost  of  doing  business.   Construction  costs,  there- 
fore, are  an  important  factor  in  fixing  rates.   If  construction 
costs  are  too  high  rates  must  be  high. 

Taxpayers,  like  any  group  of  business  men,  invited  to 
put  their  money  into  a  power  or  other  project,  expect  from  the 
promoters  a  reasonably  accurate  estimate  of  the  construction 
cost  so  that  they  may  ascertain  v-hether  the  rates  to  the  pat- 
rons of  the  service  can  be  made  low  enough  to  attract  customers 
and  assure  success.   Investors  induced  to  go  into  a  business 
on  the  representation  that  the  construction  cost  would  be  25 
millions  are  justly  displeased  if  the  construction  cost  ex- 
ceeds 65  millions.   Yet  that  is  what  happened  in  Ontario, 

Premier  E.  C.  Brury,  head  of  the  present  farmers'  ad- 
ministration of  Ontario,  while  addressing  the  federation  of 
business  men's  associations  at  Toronto  on  March  17,  1922,  said: 

"I  do  not  know  how  much  the  Chippawa  Development  is 
going  to  cost,  llobody  knows  that.   It  may  be  money  well 
spent,  but  the  thing  which  the  Province  must  have  in  a 
public  service  commission  on  whose  guidance  and  recom- 
mendation we  undertake  the  expenditure  of  great  sums  of 
public  money,  is  estimates  upon  which  we  oan  depend.   If 


we  get    into  the  habit   of  talcing  estimates  that  cannot  be 
borne  out,  we  are  running  into  danger,      I   do  not  know 
that   Chippawa   is   costing   one   cent  more   than   it   ought   to 
cost ,    but    I   do  know   that   the  Province  has  been  told  that 
it  would  cost  much   less  than   it    is  going  to   cost.      Do 
you  get  my  point? 

"If  we  are  going  to  have  the  proper    sort   of  guidance, 
we  must  be  told   in  advance  as  nearly  as  possible  what   these 
great   public  ventures  will  cost,    so   that  we   can  knov;  whether 
they   should  be  gone   into   or    not, 

"The  history  of   the  Chippawa  Development    is  this:    On 
June   23rd,    1915,    the   Chief  Engineer    of   the   Hydro  Electric 
Commission,    submitted  a  preliminary  estimate   covering  the 
development   of  100,000  horsepower   at  the  Queenston  site, 
and  ultimate  development  of  300,000  hor sepower  ,  and  said: 

'We  have  estimated  that  the  completion  of  the  above 
works  will  cost   $10,500,000,    or   an  estimated  cost  per  horse- 
power   of  $105.00   for   100,000  horsepower.      The  estimated 
annual  charge   on  the  above  expenditure  amounts  to  $944,600, 
or   $9.44  per  horsepower.      This  capital  expenditure  in- 
cludes,   in  addition  to  that  required  for   100,000  horse- 
power  development ,    the  necessary  equipment   in  the  Power 
House  and  Headworks  for  an  extent ion  to  300,000  horsepower. 
The  approximate  co3t  for  200,000  horsepower  will  be   in  the 
neighborhood  of  $70.00  per  horsepower  with  an  annual  charge 
of   less   than  $8.00. 

•As  regards  the  expenditure8  on  account  of  the  above 
considered  development,    I  may  say  that  these  would  be  about 

_   7   _ 


oO.OOO  to  $1,000,000  for  the  fiscal  year   ending  October 
31,   1916;   approximately  $3,000,000  during  the  fiscal  year 
1917;    $5,400,000   during  the  year   1918,   and  the  remain- 
der   in  1919.  ' 

"That  was   the   original  proposition  for   this  work  to 
be   completed  in   1919. 

"We  have  been  told  that    the   cost   of   Chippawa  was   due 
to   its  being  a  war   undertaking.     Well,    it  would  have  been 
if   it  had  been  carried  out   according  to   schedule;    but   not 
one-tenth  of  the  present   cost  was   spent    during  war   time. 
The  war  was  over   before  the   thing  was   seriously  undertaken. 
It  may  have  been  planned  as  a  war-time  enterprise,  but   it 
was  not   conducted  as  a  war-time   enterprise  for  the    simple 
reason  that   the  war  had  ceased  before  the  work  was   serious- 
ly gone   on  with  or  much  money   spent   on  it, 

"In  1918,    the  proposal   to   develop   275,000  horsepower 
had  risen  to  450,000,   and  the  ultimate   cost    of  developing 
450,000  horsepower  was  given  as   $40 ,000,000.      In  1920 
fears  began  to  be   felt  and  an  engineer,    named  Cooper,  was 
called  in  to  make  a  report,    and  Mr.   Cooper  made  a  report, 
Mr.   Cooper   intimated  in  his  report   that   the  cost   for 
275,000  horsepower  would  be  a  little  over   $65,000,000. 
Mr.   Cooper's  report  has  been  vindicated  almost  to  a  cent. 
But  what  happened?     The  Commission  held  that  Mr,    Cooper's 
report  was  not  reliable.      The  Commission  sent  for   other 
engineers.      The  Commission  placed  the  facts  of  the  con- 
struction up  to  date  before  the  other   engineers.     Messrs. 
Stuart  and  Kerbaugh  made  an  estimate  not   of  #65, 000,000, 

-  8   - 


but  of  v40  ,000  ,OJJ.   The  Government  was  asked  to  come  over 
for  a  consultation.   I,  myself,  with  Col.  Carmichael,  T/ent 
to  Niagarr.  Falls,  and  v;e  believed,  on  the  word  of  the  Com- 
mission, that  the  Cooper  estimate  could  not  be  relied 
upon, 

"At  the  last  session  the  Hydro  Electric  Commission 
submitted  an  estimate  of  $55,000,000,  some  $5,000,000 
more  than  the  estimated  cost  by  Messrs,  Stuart  and 
Kerbaugh  for  the  completion  of  the  Canal,  with  five  gen- 
erating units  installed. 

"Last  year  it  became  apparent  that  that  cost  was 
going  to  be  vastly  exceeded,  and  the  Government  became 
alarmed  and  took  the  matter  up  with  the  Commission;  and 
what  was  the  explanation?   That  the  cost  of  cement  and 
labor  had  gone  up.   In  the  Public  V/orks  Department  of 
the  Government  they  had  gone  down.  We  v/ere  told  also 
that  the  steam  shove!.     I  not  v/ork.   That  the  haste  pro- 
gram accounted  for  far  more  money  than  was  expected.   That 
was  rendered  a  little  hard  to  believe  on  account  of  the 
fact  that  the  haste  program  had  been  abandoned  away  back 
in  July,  and,  instead  of  developing  power  in  September, 
we  did  not  develop  it  until  the  Hew  Year.  We  are  enquir- 
ing, and  we  have  enquired  and  we  intend  to  enquire  further, 

"As  I  have  said,  we  do  not  know  whether  Chippawa  has 
cost  too  much.   I  do  not  know  whether  that  work  has  not 
been  done  as  efficiently  and  economically  as  it  could  be 
done;  but,  if  it  has,  the  public  has  not  received  the 
proper  information  as  to  the  estimated  cost.   One  cannot 
get  away  from  one  or  the  other  view;  and  the  Government 

-  9  - 


intends,  and  we  muat  for  the  safety  of  the  Hydro  Electric 
Development  in  On  tar io,  get  some  sort  of  an  organization 

ch  will  not  lead  us  to  live  from  year  to  year  in  a 
fool's  paradise,  but  will  tell  us  the  exact  truth  in  re- 
gard to  orojected  public  undertakings  of  this  nature.   I 
8  it  that  that  is  necessary,  if  we  are  to  save  hydro- 
electric development  in  Ontario, 

"No  business  man  among  you  would  tolerate  for  a  mo- 
ment estimates  such  as  I  have  quoted  to  you,  going  up 
without  any  justification,  and  with  all  the  suspicion  be- 
hind it  that  they  are  intended  to  induce  the  public  to 
take  up  a  project  which  otherwise  they  might  be  chary 
about  taking  up.   That  is  not  the  right  oort  of  business. 

"I  believe  in  public  ownership  and  I  believe  in  the 
success  of  public  owner  ship,  but  I  believe  that  that  suc- 
cess can  only  be  obtained  by  the  publio  knowing,  by  the 
Province  knowing  the  cost  of  the  works  which  are  to  be 
undertaken  with  at  least  a  fair  degree  of  accuracy;  and 
that  we  must  have,  V/e  intend  to  find  out  why  we  have  not 
had  it.  That  is  a  position  which  the  Government  must  take 
in  the  defence  of  public  ownership  in  the  province  of 
Ontario. 

"Unfortunately,  •     ve  another  development  work 
which  is  an  example  of  almost  the  same  sort  of  thing.  Up 
in  the  northwest  section  of  the  Province  there  is  a  great 
public  ownership  development,  the  Nipigon  Development. 

"The  people  of  Fort  William  and  Port  Arthur  undertook 
this  development.  They  were  definitely  promised  cheaper 
po-      .  e  work  was  gone  on  with  and  was  to  cost  between 

. .  10  . 


$4,000,000  and        ,    jO.OOO.      It  has  already  cost,    for  a 
partial  development   $6,300,000.      That   is  what  comes  from 
under -estimating.      The  people  of  Port  Arthur   and  Fort 
William  were  given  rosy  figures.      They  voted  for   cheaper 
power;    no  man  votes   for    dearer  power  ;   hut  "because  the 
work  was  underestimated  they  are  getting  dearer  pov/er; 
and  they  are    sore  about    it,    and  do  you  wonder    that  they 
are    sore   about    it?      Again,    it  was  not   a  business  under- 
taking. 

"I  am  not   saying  that   the  Nipigon  Development  may 
not  be  wise,   but   I  am  saying  that  the  people  of  those  two 
cities  responsible  for   it   should  have  been  given  an  esti- 
mate  somewhere  about  what    it  would  have   cost   to   go   into 
it,   and  then  have  been  allowed  to  use  their    own  judgment, 

"Last  year   there  was  piled  up  a  loss  which  must  be 
added  to  capital,   a  loss  of  about   $300,000;    and  the  people 
of  Port  Arthur   are  paying  about   $21.00  a  horsepower   for 
power  at  cost,    instead  of  some  $15.00  per  horsepower  under 
private   ownership.      Under   these  public   ownership   develop- 
ments you  cannot   look  too  far   into  the  future.      You  cannot 
build  a  work  that   is  to   supply  power   ten  years  hence. 
Under   the   scheme  of    'power  at   cost'    the  capital  cost  must 
bear   the   interest   charge  until  consumption  overtakes  it. 
In  Port  Arthur   the   interest  charge   is  not  half  met  by  the 
cost   of  the  power   sold.      The  remainder   of  the   interest 
charge   is  added  to  the  capital  account;    so  that  each  year, 
wihout  a  bit   of  work  being  done  upon  the  development,   the 
capital  cost  mounts  up  by  about  $300,000.      It   is  the  old 

-    11    - 


scheme .   I  believe  in  private  promotions  it  is  described 
as  the  policy  of  making  the  dog  eat  his  tail  until  he  gets 
something  else  to  feed  upon.   It  is  probably  a  sound  method 
and  it  is  certainly  the  only  way  in  which  these  charges  can 
be  met,  unless  the  Province  as  a  whole  is  to  absorb  the 
loss.   But,  Mr,  Chairman,  if  the  dog  has  to  feed  upon 
himself  until  he  has  not  only  eaten  his  tail  but  also 
half  of  his  body  he  becomes  a  comparatively  worthless 
dog;  and  that  is  exactly  what  we  fear  of  such  schemes 
as  the  Nipigon  Power  project,  built  ahead  of  the  re- 
quirements of  its  power  market.   It  is  the  thing  which 
may  become  apparent  at  Chippawa  if  we  do  not  handle  it 
wisely,  v/e  must  handle  it  as  wisely  as  we  can  --  other- 
wise it  may  become  a  burden  to  the  people  of  Ontario 
instead  of  a  benefit  to  the  people  of  the  Province,   That 
is  why  the  Government  has  been  stepping  in  and  making 
enquiries. " 


-  1C  - 


HOY/  DO  THE  WATER  POWER  RESOURCES  OF  ONTARIO 
COMPARE  WITH  CALIFORNIA? 

Nowhere  in  the  world  are  natural  conditions  as  favor- 
able for  the  development  of  cheap  water  power  as  Niagara  Falls. 

Water  supply.  At  Niagara  Falls  there  is  available 
for  the  power  plants  a  uniform  supply  of  water  throughout  the 
r  and  there  are  no  dry  years. 

In  California  dry  seasons  and  dry  years  both  require 
the  construction  of  large  reservoirs  for  storing  water  to  use 
during  these  dry  pericds.  Steam  power  plants  are  also  neces- 
sary for  this  purpose. 

Power  Plants .  At  Niagara  large  quantities  of  power 
can  be  developed  in  large  plants  conveniently  located  to  con- 
struction facilities  Buch  as  transportation,  equipment,  mater- 
ials and  labor  . 

In  California  with  many  small  streams,  a  large  number 
of  small  plants  are  required  located  in  inaccessible  mountain 
canyons.   This  means  difficulties  in  transportation  of  men  and 
equipment,  maintenance  of  large  camps,  seasonal  construction,  etc. 

Tranemission  Lines  .  In  Ontario  the  topography  of  the 
country,  transportation  facilities,  proximity  to  materials  and 
labor  markets,  besides  relatively  short  transmission  distances, 
are  all  conditions  which  mako  for  low  transmission  costs. 

In  California  transmission  distances  are  much  greater, 
lines  have  to  be  censtructed  in  remote  regions,  and  across  moun- 
tains, deserts  and  marshes. 


-  11  - 


WHAT   ABOUT  RAT 38  CHARGED  IN  SMALL  COLHAUNITIES  IN  ONTARIO , CANADA V 

An  tza  .'..nation  of  the  reports   of  the  Hydro  Electric 
CcamiBcian   of   Ontario,    Canada,   reveals  the  fact  that   of  the 

B   under  that    service,   all    of  them  less  than  133  miles 
-ira  Fa]  Is,    there  is   one  poor  little  town  that  pays 
20  cents  per  kilowatt   hour.        Jrrn  that   exorbitant  price  the 
costs  run  down  thus:      Ore  town  18  cents;     4  towns  16  cents; 
8  towns  15  cents;      28  towns  14  cents;      1  town  13  cents;    22. 
towns  12  cents;      4  towns  11   cents;      23   towns  10  cents;      and  18 
towns   9  cents.        Where   in  all   California  can  a  situation   of 
exorbitant  rates   such  as   this  "be  found?     This   is  what   is 
"brought  about  when  the  fallacious  theory   of  power  at  cost 
is   introduced.        The  average  city  rate   in  Calif  or nia1 is  about 
3   cents  per  kilowatt  h^\u? .        Taken  from  the  reports   of  the 
Hydra  Electric  C  mmission  of  Ontario,   the  average  city  rates 
of  twenty-five   c umunities   in  the  Province   of  Ontario    (not 
maximum  rates)  the  following  interesting  and  astonishing 
analysis  is  revealed: 


-   14  - 


Comparison   of  Rates   Charged   in  Small    Communities   in  Ontario, 
Canada,   from  Late3t  Report   of  Hydro  Electric  Commission 


•  mce   in 

Average  rate  cent's 

Town 

miles  airline 

Population 

per  KWH 

overland  from 

igara  Falls 

Domestic 

Commercial 

Ailsa  Craig 

123 

568 

8.4 

13.1 

Beeton 

104 

564 

8.9 

9.4 

Brigden 

162 

600 

9.2 

9.5 

Burgessville 

77 

200 

7.5 

9.3 

Comber 

187 
118 

500 

8.6 

9.4 

Creemcre 

643 

ll.l 

10.4 

Dashwood 

131 

600 

10.2 

12.2 

Delaware 

119 

300 

11.0 

11.0 

Dorchester 

100 

500 

9.3 

9. A 

Draytcn 

94 

706 

12.9 

13.1 

Embr* 

93 

484 

9.2 

9.4 

Forest 

145 

1444 

9.8 

9.8 

Grant  on 

114 

300 

9.4 

15.2 

Hensall 

124 

7^2 

8.0 

8.3 

Hi  ghgat  e 

144 

500 

9.2 

8.3 

Holstein 

109 

350 

10.6 

7.5 

Lambeth 

113 

500 

8.7 

10.7 

Brydges 

124 

500 

8.9 

10.6 

Rodney 

138 

676 

10.1 

11.4 

St.   Jacobs 

89 

500 

7.7 

8.0 

Sunderland 

133 

600 

8.0 

9.8 

Thorndale 

103 

400 

8.7 

9'1 
10.8 

Tottenham 

95 

517 

12.7 

Watford 

140 

1300 

8.3 

10.9 

Zurloh 

129 

600 

11.8 

13.6 

Bear  in  mind  that   these  are  not  maximum  but  average 
rates.       The  maximum  for  domestic  users   is  not  published. 
Charges   on  the  first  block  are  14  cents   or  more  per  kilowatt 
hour  in  town  after   town,   and  in  one  case    (liarkham)   is  20  cents 
per  kilowatt  hour.       While  Hydro's  main  transmission  lines  ex- 
tend to  over  220  miles  from  Niagara  a  probable  reason  fox  the 
comparatively  moderate  distances  in  the  preceding  table  is 
that  under  a  "cost"   system  of  rates  such  towns  would  have  I 
be  charged  rates  at  which  olectricity  could  not  be  used  at  all 


-  15  - 


WHAT  OF  THE  ECONOMIC  ACCOMPLISHMENTS  IN  ONTARIO,  CANADA? 

In  propaganda  sent  out  by  the  State  Corapaign  Committee 
for  California1 3  Water  and  Power  Act,  voters  of  the  State  have 
been  deluged  with  statements  stating  that  should  California  adopt 
this  Act  there  will  be  created  new  markets  for  farm  produce  by 
attracting  population  and  industry  to  California  as  has  been  the 
case  in  Ontario,  Canada.   Let  us  see  what  has  happened  in  Ontario,, 
Canada,  during  the  20-year  period  that  the  Hydro  Electric  Commis- 
sion has  been  uppermost  in  the  :ninds  of  the  people  of  that  province. 

In  spite  of  the  fact  that  fabulous  claims  have  been 
made  as  to  Ontario's  f*reat  industrial  prowess,  the  fact  remains 
that  over  this  entire  period  California  has  outdistanced  Ontario 
in  the  value  of  the  manufactured  products.   Not  only  this,  but 
recent  census  statistics  announced  by  the  Bureau  of  the  Census  at 
Washington  show  California  to  have  taken  eighth  place  in  value  of 
manufactured  products  among  all  the  great  states  of  the  Union,  and 
fifth  place  in  her  number  of  industries.   The  following  figures 
of  manufacturing  and  industries  of  Ontario,  Canada  and  of  California 
are  emphatic  in  their  emphasis  on  the  wonderful  forward  progress  of 
California,  in  spite  of  the  tremendous  concentration  of  industrial 
effort  that  has  been  said  to  be  made  in  Ontario,  Canada. 


-  16  - 


-•TURING  AND  INDUSTRIES 


ONTi«IO   # 

Year 

umber 

Capital  Invested 

Value  Product 

.     persons     J 
Employed | 

1905 

6,163 

215,000,000 

241,500,000 

i     184 ,000 

1010 

e.ooo 

391,000,000 

361,372,000 

i     239 ,000     ; 

1 

1915 

6,538 

947,000,000 

580,000,000 

244 ,000 

1918 

15,365 

1,503,000,000 

1,809,000,000 

334,000 

w   Reference:  Canada  Year  Book,  1920. 


MANUFACTURING  AND  INDUSTRIES 
ALIFQRNIA  ## 


Year  Number 

1904"  "67838 

1909  7,659 

11914  10,057 

•1919  11,943 


Capital   Invested.    Value  Product 


283,000,000 

537,000,000 

736,000,000 

1,333,000,000 


••••r*  •  »  \.  .--■  *  nvj  m  w.-.f  *  i:;-.-.:-.:  - 


367,000,000 

530,000,000 

713,000,000 

1,981,000,000 


Persons 
Employed 

126,000' 
142,000 
177,000 
297,000 


ww     Reference:  United  States  Census, 


-  17  - 


CALIFORNIA'S   GROWTH  JJT  POPULATION  COLLARED  TO 
OJTARIO.    CANADA'S  GROWTH 

Quoting  in  the  exact  wording  from  page  3  of  a  book- 
let  sent   out  by  proponents  of  California's  Water   and  Power 
Act,  we  find  the  following  statement: 

"California's  Water  and  Power   Act  will  create  new 
markets  for    farm  produce  by  attracting  population  and 
industry  to  California  as   it  has  done   in  Ontar io, Canada, " 

It   is  but   to   laugh  to  compare  the  growth  in  popula- 
tion of  California  with  that   of  Ontario  and  presume  that  the 
voters  are   so  foolish  as  to  think  that  Ontario's  growth  in 
population  has  been  superior    to   that   of   California.      The 
facts  tell  the   story.      Here  they  are: 

Population   (Total) 


California 

........... ..r. ...... .............. 

1900  1,485,000 

1910  2,378,000 

t 

*  Estimate 


■•»<-■ 


Ontario 


1901  ,182,000 

1911  2,523,000 

.  ■ 

1919#  2  , 821 ,000    j 


References: 

Canada  Census  Reports 
United  States  Census  Reports, 


-  18  - 


WILL  BBC'  :  RURAL  POPULATION? 

Proponents  of  California's  Water   and  Power   Act  are 
loud   in  their   nr oclamations   that  the  passage   of  this  Bill  by 
the  voters   of  California  at   the   next    election  in  November  v/ill 
attract  more  people  to  our  rural  communities  as  it  has  done   in 
the  Province  of  Ontario.      A  great  teacher    once   said:    "By  their 
fruits  ye   shall  know  them.  "       Here   is  a  comparison  of  20  years' 
of  growth  in  California's  rural  communities  as  compared  v/ith  a 
similar   period   in  Ontario,    and  it    is    seen  that   California  start- 
ed  out  with  707   thousand  people   in  her  rural   districts,    and  at 
the  end  of  20  years  had   over   a  million  people   in  these  same 
rural  communities,  while  Ontario  started  out  with  a  million  and 
a  quarter    in  her  rural   communities  and  actually  wound  up  the 
20-year   period  with  a  quarter    of  a  million  people   less   than 
when  she  started. 

■gotu'lation   (Rural) 


tiilliiHi; 

California  ## 


- 


1900 
1910 
1920 


1911 
1919# 


707,000 

903,000 

1,095,000 

#    Estimate 
d*#     All  communities  under   2500  population 
###     All  communities  under      500  population 

References: 

Canada  Census 
United  States  Census 


Ontario  ### 
1901  1,247,000 

1,195,000 
1,000,000 


- 


if  PROSPERITY  ON  THE   FARMS  UNDER  YDRO  ELECTRIC 


CC  ION  0?   ONTARIO   A3   COMPARED  "II TH  CALIFORNIA'S 

IATIVB   IN  PCTER    SERVICE? 

The  amount   of  power  "being  used  by   the  Hydro  Electric 
Power   Commission  of  Ontario   en  the  various   systems   in  the 
province   is   337.170  horse  power,   and   of  this   only  2500  horse 
power,    or    less   than  one  per   cent,    is   supplied  to  the  agricul- 
tural  industry.        So  found  an  investigating  committee   of  that 
province  acting  under  pressure  brought   to  bear  by   its   legis- 
lature through  the   dissatisfied  farming  communities  of  the 
province,      Compare   this   situation  with  the   12,000   farms   of 
California  that   today  have   the  most  wonderful   service   in  the 
world  with  a  connected  load  of  over   half  a  million  horse  power, 
and  distribution  lines  not    of   500  miles   in  length,   as  prevail 
in  Ontario,   but   a  vast   service   involving  15,000  miles  of  rural 
lines.        Here   is  the  way   the  farm  values  have   increased  in 
California  under   this  service  as  compared  with  the   situation 
in  Ontario  during  the  period  that  the  governmental   ownership 
idea  has  prevailed  in  that   province.      In  20  years   California's 
crops  increased  344  per    cent,  while  Ontario's  increased  only 
240  per   cent. 

Farm  Values   -   Crops 


^11  Crops 
"  Ca l'i  for  n i a  "  On  t  af  i  6" " " 


1900  1920  t  1901  1918  % 

132,000,000     i  588,000,000:344  jlOQ,  000,  003      j  376  ,  000 ,  000     i  240 


References: 

Heaton»s  Annual  1921 
United  States  Census. 


-   20  - 


Livestock  on  the  farms  in  this  20-year  period  in- 
creased in  California  230  per   cent,  while  in  Ontario  the   in- 
crease was  only  51  per  cent. 

Farm  Values  -  Livestock 


.•s-.-^**  m  m  ^««.  mmm  *»-*-*v  -*  *  w  m  ^j--^^ 


Ontario 
1918 
324,000,000 

-.tin  *-.  *-.--*------^****x  j  Itlflftiti      • 

References' ; 

Heaton's  Annua \   \921 

United  States  iv.isub   1900-1920 


1900 
67,000,000 


California 

i' 
.....  .........  .........  —  ...,«.-..--.- 

1920  %       |  1901 

221,000,000    !230    ;:i29,000,00 


51 


Implements,   on  the   other  hand,  which  register  a  pro. 
gressive  type  of  citizenry,    increased  in  value  on  California 
farms   540  per   cent,  v/hile  in  Ontario  the   increase  was   only 
85  per    cent. 

Farm  Values   -   Implements 


•  ornia 
1920 
21,311,000      136,000,000 


Ontario 
%  1901  1918 

540 :    60,000,000      111,000, 


References: 

Heaton's   Annual,    1921 

United  States  Census   1900-1920 

And  far:n  buildings   increased  in  value  278  per   cent   in 

California,  Tdth  only  a  37  per   cent   increase  in  Ontario. 

im  Values  -  Buildings 


California  Ontario 

X)  1920  %  1901  1918  % 

'7,000,000  :   291,000,000  :  278   :;    227,000,000      380,000,000        37 

References: 

Heaton's  Annual,   1921 

United  States  Census   1900-1920 


-  21   - 


rm  value 3  as  a  whole  went   forward  by  the 
wonderful  growth  of  342  per   cent,   as   compared  to   only  a  40 
per    cent    increase   in  Ontario, 

Farm  Value-  s 


1911 
630,000,000 


California 
1920 


---- . 
Ontario 


2,783,000,000 


% 


.  0 


19  01  1918 

342  :    585,000,000   819,000,000      40 


Referencer  j 

iton'c  Annual   3921 
United  States  Censu3   1900-1920 

It   is  no  wonder   then  that   the  number    of  farms   in  Cali< 
fornia  during  this  period  increased  "by  62  per   cent,  while   in 
Ontario,   Canada,   they  actually  fell  off  24  per   cent. 

Farm  Data 


Number   of  Farms 
California 

1920*  #"in-  1901 


crease 
62 


)ntario 
1918 


'     ,500  118,000 

References: 

Heaton's   Annual   19: 

United  States  Census  19C0-1920 


%  in- 
crease 


224,000       j  175,000        -   24 


- 


-LL  W^   INT?.' 

Proponents   of  California's  Water  and  Power  Act  argue 
that  the  adoption  of  thin  r.easure  by  the  people   of  California 
next  November  will  attract  population  and  industry  to  California 
as   it  has   done   in  Ontario,      Canada.      The   citation  of  one   out- 
standing instance   is   sufficient   to   show  the  wonders   of  Califor- 
nia's present  progress  forward,  and  how  idle  it   is  to  attempt 
to   fool  the  people  by  telling  them  that   the   situation  in  Ontario 
is  superior   to  that  prevailing  in  this  v/onderful  commonwealth  of 
ours.     Witness  the  building  situation.        California  today,   and 
for  years  past,   has  stood  out   in  marked  contrast  to  all  other 
districts  of  the  world,   and  in  comparison  v/ith  Ontario,,   Canada, 
a  forceful   lesson  is  to  be   deduced  as  to  what  a  wrong  philosophy 
in  the  minds  of  the  people  may  do  in  the  retarding  of  construct- 
ive growth  in  a  community.      Here  are  the  figures  which  show  that 
fifteen  of  California's  foremost   cities  had  a  building  record  of 
140  million   dollars   in  1920  as  compared  with  Ontario's  $47,175,000, 
Surely  this   little  presentation  of  facts  presents  a  striking  in- 
stance of  how  mere  words  presented  by  the  proponents  of  Califor- 
nia's Water  and  Power   Act  will  fail  of  truthful  analysis  -when 
the  facts  are  known. 

Building  Permits 


15  Principal  Cities 

15  principal  Cities 

California 

Qntrario 

1916 

54-000,000 

20,229,000 

1917 

51,000,000 

17,385,000 

1918 

35, 000, 000 

21,477,000 

1919 

67,000,000 

40,585,000 

1920 

.0,000,000 

47,175,000 

References: 

Canada  Year   Look,   1920 
Bradstreet'c,    1916,1920  inc. 

•  83  - 


IS  TIPS  MURRAY  REPORT  RELIABLE? 

William  S.  Murray  is  one  of  the  most  eminent  electrical 
engineers  in  the  United  States.   He  conducted  the  Super-Power 
Survey  for  the  United  States  Government  on  the  Atlantic  Seaboard 
between  Boston  and  Washington.   He  is  conversant  with  Canadian 
conditions  and  acted  for  municipal  and  provincial  governments  in  a 
consulting  capacity.   His  partner,  Mr.  Henry  Flood,  Jr.  was  form- 
erly Secretary-Engineer  of  the  United  States  Government's  Super- 
Power  Survey  organization. 

In  August,  1921,  Mr.  Murray  was  employed  by  the  National 
Electric  Light  Association  of  New  York,  to  make  a  thorough  study 
of  the  Hydro-Electric  Power  enterprise  in  which  the  Province  of 
Ontario  is  engaged  and  compare  the  situation  in  Ontario  with  the 
Hydro-Electric  situation  in  other  parts  of  Canada  and  in  the  United 
States. 

Mr.  Murray  and  Mr.  Flood  devoted  months  to  a  3tudy  of 
the  Ontario  situation  and  to  making  comparisons  with  the  Hydro- 
Electric  situation  elsewhere  in  Canada  and  in  the  United  States, 
and  the  result  of  their  investigation  has  been  published  in  a 
printed  report  of  several  hundred  pages.   That  report  demonstrates 
that  many  of  the  claims  made  for  the  Ontario  Governmental  Project 
are  unfounded  and  that  under  comparable  conditions  Hydro-Electric 
service  is  better  and  cheaper  in  other  parts  of  Canada  and  in 
parts  of  the  United  States,  including  California,  where  the  service 
is  rendered  by  private  corporations. 

Sir  Adam  Beck  is  in  charge  of  the  Ontario  Project.  When 
the  Murray  report  was  published  he  cent  a  telegram  to  California, 

-  24  - 


accusing  Mr.  Murray  of  misquoting  the  Pov/er  Commission  and  mis- 
representing and  distorting  facts. 

Answering  Sir  Adam  Beck's  charges  of  misquoting  and  dis- 
tortion Messrs.  Murray  and  Flood  write  in  response  to  a  letter  of 
inquiry  from  California: 

"In  preparing  our  report,  we  have  tried  to  he  more  than 
careful  in  adhering  to  the  statistics  published  by  the 
Commission  or  to  statements  of  record  made  by  officials 
of  the  Commission,  and  as  a  matter  of  fact,  in  respect 
to  the  annual  costs  of  pov/er,  after  the  figures  were  pre- 
pared, these  were  submitted  to  Mr.  Pierdon,  the  Commis- 

Accour.tant,  who  had  them  checked  so  that  he  was 
thoroughly  satisfied  that  they  were  correct." 

"From  the  standpoint  of  absolute  fairness,  it  is  impos- 
sible to  compare  costs  for  electric  energy  in  the  Province 
of  Ontario  with  that  anywhere  else  in  the  world,  because 
to  my  knowledge,  there  is  no  other  place  that  has  a  com- 
bination 30  suited  to  inherently  low  construction  and  op- 
eratinc  costs  for  both  their  pov/er  production  and  trans- 
mission facilities,  and  in  making  such  few  comparisons  as 
we  did,  we  v<ere  in  each  instance,  to  a  degree,  favoring 
the  Hydro-Electric  Power  Commission,  because  the  regions 
compared  in  the  States  were  not  blessed  with  cheap  water 
power  for  their  complete  demands,  or  a  uniform  rolling 
country  over  which  to  construct  their  transmission  lines." 

"Naturally,  Sir  Adam  brings  forth  the  point  of  low  rates 
to  domestic  customer  .   This  is  the  great  argument  al- 
ways advanced  by  advocates  of  the  Hydro-Electric  Power 
Commission.   There  is  no  nuestion  but  that  domestic  and 
commercial  rates  (iven  by  Hydro  to  those  classes  of  cus- 
tomers are  low,  V-ut  industry  is  made  to  carry  the  losses 

resulting  irom  such  low  rates  and  accordingly  must  pay 
more  for  its  electrical  energy  than  do  like  industries 
in  the  sections  of  the  States  compared  to  Ontario." 

"In  our  telegram,  I  gave  you  the  comparison  between 
Toronto  and  Bufft.lo,  and  the  same  form  of  comparison  works 
out  for  the  entire  province,  but  probably  to  a  more  mark- 
ed degree,  as  the  other  sections  of  the  province  do  not 
have  proportionally  as  much  pov/er  business  as  does  Toronto." 

"Low  domestic  and  coiinercial  rates  are  probably  brought 
about  to  3ome  extent,  because  i      way  the  voter  ap- 
parently belie /es  he  is  obtaining  his  energy  very  cheap- 
ly.  It  is     Ly  the  old  question  that  comes  up  of 
direct  c.  .t.   In  Ontario,  the  domestic  and 

ce     ial  consume         t  of  hi    metrical  energy 

-  25  - 


bill  in  Ills  bread  bill,  grocery  bill,  shoe  bill  and  in  all 
other  bills  for  r.armi'ac  tured  articles  that  he  may  use." 

Mr.  Murray,  in  a  subsequent  letter,  says: 

"I  would  like  to  emphasize  that  the  'many  half  truths, 
misstatements'  to  v/hich  Sir  Adam  Beck  refers  are  founded 
on  facts  given  us  by  the  Hydro-Zleetric  Power  Commission. :| 

"In  our  report,  we  have  been  particular  to  take  the  con- 
servative standpoint  wherever  we  have  dealt  with  the  costs 
resulting  from  the  operations  of  the  Hydro-Electric  Power 
Commission.    Additional  facts  that  have  been  ascertained 
since  the  publication  of  the  report  show  that  the  costs  for 
power  furnished  by  the  government  utilities  in  Ontario 
have  been  favored  as   o.rpared  to  the  costs  for  power  in 
the  States  and  in  C 

"As  our  report  is  entirely  founded  on  fact  and  as  we  have 
in  no  instance  drawn  conclusions  based  upon  anything  but 
figures  and  statements  of  record,  you  will  appreciate 
that  we  stand  cquarely  back  of  the  conclusions  set  forth 
because  they  cannot  be  escaped  or  refuted." 

The  Spreckels  propagandists  assert  that  Messrs.  Murray 

and  Flood  are  tools  of  the  power  trust,  which  they  have  imagined 

for  propaganda  purposes.   Their  standing  in  the  profession  is 

such  that  no  one  will  believe  that  Messrs.  Murray  and  Flood  have 

deliberately  misstated  facts  in  order  to  please  the  National 

Electric  Light  Association. 


-  26  - 


ART  CFQRNZA  ANT  ONTARIO 

Zn   compering  rates  between  California  and  Ontario,  11 
is  well,  to  t 

1.  imia  rates  are  fixed  by  the  Railrcad  fem- 
mir;    .  on   a  ua3io  of  cost,  and  that  an  attempt  is  made  to  railre 
each  class  of  service  bear  its  just  share  of  expenses.    in  On- 
tario the  burdens  are  borne  largely  by  the  power  users,  so  that 
in  comparing  household  rates,  these  would  have  a  tendency  tc  ap- 
pear lower  in  Canada  than  if  .justified. 

2.  That  Ontario  rates  are  based  upon  the  distance  from 
the  source  of  generating  power,  so  that  communities  (or  farms) 
located  at  distant  points  must  ^ ay  a3  highaas  ten  times  as  much  as 
those  near  at  hand.    In  California,  the  citizen  is  not  penalized 
for  locating  away  from  the  source  of  power.   If  he  were  the 
ci+ies  would  pay  more  than  they  now  pay.    Imagine,  a  little  - 
lil:e  Auturn,  California,  with  its  small  population  enjoying  c 

an  the  City  of  San  Francisco  or  the  City  of  Oakland,  with 
th     .ormous  density  in  population  and  gigantic  users  of  power, 
simply  because  they  happen  to  be  located  farther  from  the  source 
of  power  development,  when  the  Sierras  themselves  were  created  for 
blessings  to  be  enjoyed  by  the  entire  State. 

3.  That  each  system  in  Ontario  (there  are  eight)  has  its 
own  schedule  of  rates  based  upon  costs,  bo  that  adjacent  towns  may 
have  rates  varying  500  per  cent.   Of  the  232  communities  served 
by  the  Ontario  Commission,  over  100  have  rates  higher  than  8  cents. 

4.  That  the  Niagaras system  is  a  special  situation  ani 
rates  on  power  from  this  source  should  properly  be  compared  only 
with  rites  on  power  generated  on  a  similar  basis,  for  instance,  un 

-  27  - 


-tanro,  en  the  American  3ide.   V/hen  this  is  dene,  it  is  ap- 
jnt  that  the  private  companies  in  New  York  State , operating 
with  a  greater  requirement  fcr  steam  standby  service  and  higher 
B<  ts,  offer  a  lower  rate  fcr  a  similar  type  of  service. 

5.  That  California  companies  have  greater  distances  to 
ecver  in  rendering  service  —  in  fact,  Ontario  a3  af  1920  had 
in  miles  cf  transmission  line  "but  35  per  cent  of  the  total 
mileage  for  California  as  of  1919.   Further,  California  com- 
panies serve  only  483  customers  per  mile  as  against  5^7  inhabi- 
tants per  mile  for  Ontario. 

6.  That  Ontario  rates  are  stated  in  dollars  per  horse- 
power-year, subject  to  revision  at  the  end  of  the  year  when 
actual  costs  are  known.   This  is  a  whclcnale  rate  and  makes 
n*  allowance  for  the  amount  of  electricity  used.   In  order  to 
compare  rates  with  those  in  this  state,  it  is  necessary  to  as- 
sume a  load  factor,  or  to  take  individual  bills.   The  basic 
figures  necessary  to  make  accurate  comparisons  are  mt  fur- 
nished the  public  by  the  Ontario  Commission. 

With  these  facts  in  mind,  the  following  comparisons 
may  fairly  be  made.   So  far  as  possible  the  estimates  of  the 
Hydro  Electric  Commission  itself  have  been  used  in  regard  ta 
Ontario  rates. 

The  following  rates  outside  of  large  cities  offer  a 
comparison  cf  rural  service.   (This  is  on  all  systems,  Niagara 
net  excepted). 


-  28  - 


R'ir.-.l  Katjes 

Small  torvn:;.  .  .domestic  service  for  lightinc,  appliances,  etc. 

Ontario    $23  per  year        California  $20  per  year 
Ir.div?  dual  homes  along  highways. .  similar  service  as  above 

Ontario    $39  per  year        California  024  per  year 

Farms . . . 3 -hn .  motor  or  range  and  other  household  appliances, 
lighting. 

Ontario    $86  per  year        California  $50  ($38  mini- 
mum) per  year 

10-hp.  motor,  lighting  and  appliances 

Ontario   $220  per  year         California  $120  ($90 

minimum)  per  year 

City  Rates 

City  rates  are  roughly  the  same  in  the  two  districts. 
In  this  instance  it  should  also  "be  remembered  that  very  large 
industrial  development  in  the  vicinity  of  Niagara  brings  down 
the  Ontario  average. 

Taking  the  entire  Ontario  system  (Niagara  not  excepted) 
the  average  charge  to  city  consumers  is  2.04  cents  per  kilowatt 
hour.   This  does  not  include  various  items  which  are  charged  to 
the  provincial  government.  'Then  thfl  accounting  is  placed  on  the 
same  basis  as  required  by  the  California  State  Railroad  Commission 
this  figure  amounts  to  2.33  cents  per  kilowatt  hour.   This  is 
power  delivered  at  the  city  substation  and  at  least  25  per  cent 
must  be  added  to  this  to  make  it  comparable  to  city. ratos  of 
California  companies.   This  brings  the  rate  to  just  about  3 
cent 8,  which  is  al30  the  average  for  city  rates  in  this  State 
(deducting  the  allowance  for  taxes,  which  are  paid  in  Ontario 
under  another  title,. 

»  89  • 


VT     2H  MONEY  GOES  •_  HEIRO  ELECTRIC 
DEVELOPMENT  IN  CALIFCRNIA 

Ir.  comparing  the  vast  single  units  of  development 
that  are  possible  at  Niagara  with  its  nearby  easily  accessible 
country  for  distribution  purposes,  in  contra-distinction  to  the 
California  situation,  the  following  figures  give  a  striking 
idea  of  the  utter  impossibility  of  any  reasonable  comparison. 
California's  water  powers  lay  in  small  units  in  inaccessible 
recesses  of  the  mountains,  often  hundreds  of  miles  distant  from 
the  centers  of  distribution.   The  transportation  cf  machinery 
and  the  installation  obstacles  to  be  overcome  find  no  equal  in 
any  other  districts  of  the  world,  and  her  engineers  are  world 
famous  in  the  achievements  they  have  wrought.  Here  is  a  typi- 
cal illustration  from  data  compiled  by  the  California  Railroad 
Commission,  which  goes  to  shov:  where  the  7,4  cents  charged  for 
the  average  residence  consumer,  and  the  1.89  cents  charged  for 
average  power  consumer,  and  the  .993  cents  charged  for  the  av- 
erage wholesale  power  consumer  is  made  up,  and  this  instance 
gives  a  striking  accounting  for  the  costs  involved  in  buying 
power,  for  example,  for  the  Hetch  Hetchy  development  at  1/2 
cent  a  kilowatt  hour  and  the  necessity  of  selling  it  for  7.4 
cents,  1.89  cents,  or  .993  cents,  as  occasion  may  arise,  in 
the  three  outstanding  types  of  consumers  just  listed: 


-  3   - 


Where  the  Money  Goes  that  the  Various  Consumers  Pay 


(Analysis  of  Southern  California  Edison  Company's 
System  by  California  Railroad  Commission.) 


Averay 
dence 

e  Resi- 
Consumer 

Avera^ 
Cons 

e  Power 
umer 

Wholesale 
Power  Consumer 

Cost 
per 
KWH 

Percent- 
age of 
total 
cost 

Cost 
per 
KWH 

Percent- 
age of 
total 
cost 

Cost 
per 
KWH 

Percent- 
age of 
total 
cost 

State   taxes 

General   expenses 

Consumer  meter  & 
service  costs 

Distribution  costs 
Transmission  costs 
Auxiliary  steam 

costs 
Hydroelectric 

CO 

•  5^5 
.243 

00 

0.902 

0.262 

0.203 
•0.425 

7.5 
3-3 

64.3 

12.2 

3-6 

2.8 
5.B 

.140 
.062 

.048 

•  750 
.262 

.203 

.425 

7.5 
3.3 

2.5 
39.6 
13.9 

10.7 
22.5 

.070 
<j.Q33 

262 

.203 
.425 

7.5 

r 

26.3 
20.4 

42.6 

Total  Cost 

7.400 

100  % 

' 1.890 

100  % 

0.993 

100  % 

-  31  - 


■  :0N  OF  RUR..  H   CG3TJ 

Power   ct   cost,   though  a  catching  phrase  v/ith  the 
popular  mind,   has  not  as  a  matter   of  fact  worked  any  wonders 
fcr    the  farmers  of  the  Province  of  Ontario,   Canada,  when  we 

e  their  rates  today  with  those  prevailing   in  California. 
Over    12,000  farms  of  California  are   supplied  with  electric 
service .  which  represents  a   connected  load  of  over   half  a 
million  horse  power  ,   as  compared  to  the  meager   2500  horse 
pov/er    in  the  Province   of  Ontario.        Fifteen  thousand  miles  of 
rural  lines  serve  these  farms,  whereas  in  the  Province  of 
Ontario   only  500  miles  have   thus  far   been  constructed. 

To-  go   into   further    detail,    it  will  be   interesting  to 
compare  the   cost    of  electric   energy  to   California  farmers  as 
compared  to  the  proposed  cost   in  Ontario,    even  though  the  gov- 
ernment  of  Ontario   itself  proposed  to  meet   one-half  the  expense 
of  this   service.      In  small  hamlets  the  Commission  will  new  be 
able   to  supply  domestic   service  for   lighting,   appliances,    etc, 
for   $23,00  per  year.      For    lighting  homes,    other   than  farms,   on 
highways  adjacent   to   lines,   and  including  use  of  appliances, 
the   service  can  be   supplied   for   $39.00  per  year.      Energy  to 
operate  a  3-hp.   motor   or  range,   including  service  for    lighting, 
irons  and  toasters,   can  be    supplied  to  a  farm  house   for   $86,00 
per  year,  while  a  10-hp.  no+or,   including  lighting  and  appli- 
ances,  can  be   supplied  on  a  farm  for   $220,00  per  year. 

Note  what   is  already  being  done  in  California  where, 
it  must  be  repeated,   the  use  of  electricity  on  the  farm  is  un- 
surpassed.    In  small  towns  on  one  of  the  great  power   systems 
of  California  the  average  bill  for   lighting  and  ordinary 

-    SS   - 


appliance  use   dons  not  exceed  $20.00  per   year.      For   the  same 
clasf;   of  service  on  rural  lines  the  average  bill  not   ex- 

ceed $24»00  per  y9ar .      A  3-hp ,  motor    or  range,    including  ser- 

o  fcr    lighting,    irons  and  toasters,   can  receive   service 
from  a  typical  power   system  for   approximately  $50*00  per   year, 
the  minimum  charge   amounting  to  $33.00  per   year.      Service   can 
be   supplied  from  this   same   system  for    a  10-hp,   motor,    includ- 
ing lighting  and  appliance   use,   for   approximately  $120.00 
per   year,    the  minimum  guaranteed  being  not   less  than  $90,00 
per   year. 


-  33  - 


L^T  A30UI  7  :  :  CO 31  G^  PQV/ER  TO  J__  U     u3 
CC  ALIFQRNIA? 

In  a  recent  letter  from  the  chief  engineer  cf  the 
Hydro  Electric  Power  Commission  of  Ontario,  Canada,  we  are 
advised  that  general  figures  are  not  available  for  costs  of 
power  to  the  average  consumer.   In  other  words,  the  Commis- 
sion has  never  gathered  these  important  statistical  data. 
A  rareful  study  of  available  data,  assuming  a  load  factor 
similar  to  that  prevailing  in  adjacent  territory  both  in  the 
United  States  and  Canada,  however,  reveals  the  fact  that  the 
average  charge  to  the  consumer  on  the  Ontario  system  is  2.04 
cents  per  kilowatt  hour  delivered  to  the  city  distribution 
main:'.   If  the  same  methods  of  accounting  were  used  by  the 
Hydro  Electric  Pov/er  Commission  of  Ontario  as  are  prescribed 
by  the  California  Railroad  Comnisoicn  this  charge  would  be 
2.33  cents  per  kilowatt  hour.   Assuming  a  25  per  cent  loss  in 
the  distribution  system,  the  Ontario  average  rate  to  the  ulti- 
mate consumer  is  3  cents  or  over,  which  is  the  same  as  the 
average  that  prevails  in  California  cities.   In  California, 
on  the  other  hand,  the  average  charge  to  the  consumer  for  all 
energy  sold  La  1.95  cents  per  kilowatt  hour,  or  deducting  the 
amount  paid  in  taxes  (which  is  not  represented  in  the  Ontario 
rate)  this  becomes  1.75-1/2  cents  per  kilowatt  hour. 

The  California  rate  qucted  above  is  obtained  from 
1021  figures,  and  would  be  even  lower  during  normal  times  when 
industrial  demands  with  low  rates  would  further  reduce  thi3 
average  b  figure  is  gotten  from  the  records  of  the 

California  State  Railroad  Commission,  which  are  as  follows: 

-  M  - 


Calendar  Y*»p.r  1021 


Kwrhr .  sales 

Revenue 

Pacific   Gas  and  Electric   Company 

1,021,820,689 

$22,898,046.92| 

'Great  Western  Power   Company 

340,060,361 

5,947,710."3 

San  Joaquin  Light  &  Power   Corporation 

313,791,835 

5,084  ,780.88; 

Southern  California  Edison  Company 

840,081,210 

15.074.480. 

Total 

,515,  /64,095 

$49,005,018.53, 

In  the  citation  that  has  just  been  given  a  certain 
amount  of  wholesaling  of  power  has  been  entered,  which  has  a 
tendency,  of  course,  to  somewhat  lower  the  rate  situation  in 
California,  if  we  do  not  vish  to  consider  wholesale  blocks  of 
power.   Dicregarding  these  wholesale  blocks  of  power  then,  we 
find  from  the  records  of  the  California  Railroad  Commission 
that  the  average  rate  is  2.16  cents  per  kilowatt  hour,  or  1.94 
cents  per  kilovatt  hour  when  taxes  are  deducted.   In  the  gen- 
eral sales  of  power  by  the  Hydro  Electric  Pcv/er  Commission  a 
number  of  its  large  consumers  located  in  the  great  manufacturing 
district  near  Niagara  Falls  would  likewise  have  a  tendency  to 
make  the  Ontario  rate  unduly  low,  and  in  any  statement  of  large 
sales  of  power  on  the  part  of  the  Ontario  Hydro  Commission  this 
fact  should  be  carefully  borne  in  mind.  From*  a  careful  analysis 
of  all  sections  of  the  United  States,  the  average  rate  for  power 
is  found  to  be  less  in  California  than  in  any  other  Bection. 


-  35  - 


£  OF  A  B  VARIOUS  CITIES  OF  CALIFORNIA? 

Loud  have  teen  the  claims  of  proponents  of  the  Water 
and  Power  Act  that  the  municipally  owned  Palo  Alto  power  plant, 
and  the  purchase  of  wholesale  pcwer  in  Alameda  distributed  by 
the  municipality,  plus  the  Los  Angeles  Bureau  of  Power  should 
prove  conclusively  cheap  rates  for  power.   The  following  is  the 
actual  3tatus  of  this  situation: 


Average  Electric  Rates  ner   Ki '       vur  All  Classe; 
In  Some     fornia  Cities  for  1920  and  19 HI 


City 


Average      .    . 
Rate   in  Ce. 


Palo  Alto 
■Mie  da 

Pasadena 

Riverside 

San  Francisco 

Oakland 

Sacramento 

Berkeley 

San  Jc 

Baker sfield 

Los  Angeles 
Southern  Cali- 
fornia Edison  Cc. 
Los  Angeles  Gas 
Sc   Electric  Co. 


4.45  cents 
4.67 

3.37    ■ 
3.05 
2.48 
2.04 
■. 

4.08 
3.34 
1.35 
2.05 

3.09 

4.18 


R 
It 
n 
II 

n 

|| 


Whether  Municipal  or 
ivate  Ownership 

Municipal 

l.unicipal 

Municipal 

Municipal 

Private 

Privr 

Private 

Private 

Private 

Private 

Municipal 

Pr  i  vat  e 

Private 


The  foregoing  rates  of  private  companies  include  taxes 
which  are  10  per  cent  of  the  rate. 

It  is  to  be  noted  that  these  special  instances  in  no 
way  can  compare  with  the  average  rates  of  privately  owned,  but 
publicly  regulated  utilities  throughout  California.  The  only 
instance  that  can  in  any  way  be  made  to  approach  the  privately 
owned  utility  service  is  that  of  the  Los  Angeles  Bureau  of  Power, 


-  36  - 


whose  rate  is  seen  in  the  abobe  to  be  2.05  cents,  and  when 
the  proper  10  per  cent  deductions  are  made  from  the  privately 
owned  utilities'  rates  due  to  taxes  paid  by  them  and  not  paid 
by  the  municipally  owned  plants,  the  situation  becomes  even 
more  striking.  As  to  the  Los  Angeles  situation,  little  charge 
is  made  by  the  City  Bureau  of  Power  against  the  Los  Angeles 
aqueduct  Which  furnishes  its  v/ater ,  it  being  assumed  that  the 
aqueduct  itself  should  be  charged  against  the  Water  Department. 
This  makes  a  fallacious  comparison  when  placed  over  against 
actual  power  developments  as  they  exist  in  California  today, 
and  when  proper  allowance  is  made  for  this  undue  situation,  the 
Los  Angeles  rate  is  found  to  exceed  developments  cf  similar  pro- 
portions in  the  State  of  California  under  private  ownership,  but 
public  regulation. 


-  37  - 


£G        [  statistics  2        2   •;:•:•:.-:"  § 

23  REPORT  j   :htric  plants 

Exp 1 ana-  .on  of  figures  shown  on  accompanying  state- 
ment entitled  "Comparison  of  Commercial  and  Municipal  Plants, 
Year  1917,  Eureuu  of  the  Census." 

The  number  of  municipal  plants  is  35.4  per  cent  of 
the  total  for  all  plants  in  the  United  States,  but  in  no  other 
item  is  so  high  a  percentage  shown.   In  this  connection  it  is 
significant  that  commercial  plants,  while  representing  only 
64.6  per  cent  of  the  total  number,  served  82.7  per  cent  of  all 
municipalities  furnished  with  electric  current.   This  is  due  to 
the  fact  that  most  commercial  stations  distribute  current  di- 
rectly to  consumers  throughout  an  extensive  territory,  some 
supplying  scores  of  separate  localities  while  almost  without 
exception  municipal  plants  serve  only  the  municipalities  in 
which  they  are  lo.ated. 

Comparioon  of  the  number  of  commercial  plants  (4,224) 
with  the  number  of  places  served  by  the  same  (11,349)  discloses 
the  fact  that  the  average  plant  in  this  group  supplies  current 
to  nearly  three  different  places.   The  greatest  average  number 
of  localities  served  by  single  stations  is  to  be  found  in  Cali- 
fornia where  hydroelectric  development  is  most  extensive,  and 
the  average  plant  serves  about  nine  separate  localities. 

Finally,  it  is  interesting  to  note  that  without  de- 
ducting duplications,  commercial  plants  supply  80.5  per  cent  of 
the  population  of  all  districts  served  with  electricity.   Insofar 
as  the  value  of  the  plant  is  concerned,  it  will  be  ncted  that 
the  municipal  plants  are  relatively  of  little  importance,  re- 

-  sa  - 


porting  only  4,2  per  cent  of  the  total. 

The  average  rates  received  "by  municipal  plants  for 
their  current,  are  much  higher  than  those  charged  by  the  com- 
mercial group,  as  is  indicated  "by  the  fact  that  while  they  sell 
only  4  per  cent  of  all  the  current  reported,  they  receive  7.9 
per  cent  of  the  income  from  the  sale  of  current. 


-  39  - 


1 

♦> 

U  M 

^c- 

nn 

vr\ 

CJ       NO 

t»-     rn    0 

O     nO 

O 

h  cJ 

H 

C   P 

vw  00 

CN- 

ON 

■<t   e* 

Cn-     O      ^ 

rr     m 

3 

<^"ir»^ro 

rH 

.-t 

r-t 

rH 

Vt 

fl 

0 

.  *  *  • 

♦-> 

♦» 

C 

1 

Or«-iC30 

o- 

Un 

00   Tt 

nO      t>.     O 

O        * 

c 

8 

M 

*         »           • 

. 

•          • 

•         • 

•                        • 

0i 

0 

<l>    r-t 

.-H 

rj 

O 

vr\   cj 

rj    on  no 

nO     nO 

0 

u 

nO 

00 

<X> 

ON      ON 

On    CO     On 

On    CO 

r-l 

OJ 

a  0 

fi 

PilO 

~< 

CXi  C~-  •— 1 

C^- 

O 

O       CN 

c\j    rvi    CO 

r^       ■* 

0 

rHf-'sl' 

nO 

•O 

O       >~\ 

rH     NO      CO 

rH 

■H  C^ 

«H 

^-UN 

m 

3 

OJ      C\J 

O-    CO      <* 

*f     lr> 

aa 

C  r* 

m 

3  O 

a 

■-JrH 

rH 

\r\   0 

0    O    CO 

C".    nO 

c 

Sh 

H 

O- 

[N-    no 

^t        r-l        \SS 

rt      C>- 

4> 

O 

NO 

rn    rj 

■«t              CO 

TJ-         ON 

O 

T3 

-< 

•* 

- 

» 

- 

H 

C    •• 

§ 

<~0 

O-    O 

r-^                      r-i 

ON 

CM 

rH 

c\i    tJ- 

ro             m 

CJ 

On 

C 

:-. 

r-i 

C\J 

0 

• 

HH~ 

r-4    O 

t:,     *f, 

m 

■ 

rn 

K 

r-l 

r-t 

g 

^O-O 

0 

rn 

•-*      f-i 

vr\   on  no 

ON       ON 

o>  co 

-h 

r  0- 

* 

CM 

<      <■  > 

ON       CN-       ^ 

Cn.    CO 

vMrOCO 

ro 

t>- 

ON       O 

rn   no     0- 

m      rH 

o 

3  0 

m> 

*.     * 

■ 

* 

*             * 

- 

■ 

m 

r-t 

0  ^ 

•J 

rfrm 

-i 

ON 

nO      t* 

CN-        ^t           O 

CN*        CJ 

•p 

55 

u 

r-t 

UN 

>-{    m 

rj    on    on 

r-t       O 

c 

;., 

■»-> 

V 

< 

O     nO 

<-{                   rH 

lf\     CM 

• 

<M     '-» 

c 

■ 

•        • 

* 

*                   «fc 

0 

(0 

0  V 

2 

vO 

r>-»   nO 

\r\           oj 

rj    no 

3 

rH 

0 

\f\ 

rn    CO 

On            >-\ 

CJ 

0 

•n 

>>w 

0 

ON       Tt 

m          co 

C*« 

ON 

C 

in 

• 

» 

. 

<u 

n 

rj 

ON 

•<* 

-1 

^  c- 

0 
0 

| 

4»    4» 

•1               CJ 

CM 

H    ^H 

O    On 

X! 

CO 

<*J^  CO 

NO 

rj 

rH       O 

CN.       rH         Tt 

O      rr> 

Pi    "-» 

•<*  CM    rH 

r-t 

NO 

*        "* 

O     ^      ro 

O      O 

M 

4) 

H  -f 

t>- 

NO 

^      CM 

m   xtn    cj 

CO      C^ 

1  1    ^j 

<M 

> 

s 

O 

i-4 

NO  V\rH 

ro 

ON 

CJ       Tf 

CO     Vr\    On 

-^     CO 

•»-> 

0  N 

H-> 

rH 

rH 

rH 

ON      ON 

NO         O         ^t 

NO         O- 

c 

O       JM 

3 

a) 

ON 

ro    CO 

XTN     rH       O 

ON      r-t 

0> 

Jh 

♦i 

* 

*                *» 

• 

* 

0 

f*t 

oj 

0 

rj 

O       NO 

NO                        Tt 

r-«       t>- 

O 

M 

a, 

H 

NO 

NO        OJ 

fi                 "st 

vr\ 

UN. 

3 

s 

O    Vr\ 

^         °. 

CN. 

0 

25 

« 

0 

• 

• 

O 

0 

m 

r-\ 

\r\ 

CM 

«  d 

<a              ro 

CM 

0 

3 

- 

T3 

O 

••-> 

> 

O 

<j 

oj 

o> 

♦j 

0) 

c 

<-t 

-  CO 

9 

c         w     ♦» 

<6 

■ 

Z 

-<             0>O 

*J 

?s 

c  0 

<J 

T3            C      ^ 

O 

i 

65 

0 

*4 

3           O 

•♦J 

H 

3 

rH  a     m      1 

1 

• 

•p  d 

»1 

0* 

C    OJ       M 

•c1     o 

h 

O   O 

■p 

0) 

c   W     OJ      0 

rH        h 

s 

•  0 

0) 

r<    fl}         O,        C 

O        i> 

A 

B 

W  »-4  .H 

--« 

4) 

>         0 

0     6 

4->   rH   — 1 

XJ 

«r<         -H 

0 

<y 

OJ 

c 

•h  -h 

H-> 

4-> 

O   TJ        O        ■»■> 

CT        *-> 

3 

a 

♦*  a 

<M     C 

c 

OV    C                     R) 

In        CJ 

c 

fJ 

h    MH.' 

~* 

0  a> 

(15      V 

3       3 

a> 

Pi  c  c 

u£ 

*      6 

a>     to 

0    0 

> 

H 

r<     H 

C     r. 

Q.      O 

t)   CI      JO 

x: 

«i> 

<M  •»■>  r> 

«« 

0  3 

o»  «j    e    <m 

(H 

0  rt  «J 

O  TJ 

-i    O 

«M         C 

-.    g    0 
cue 

*-»     0 

O 

U    Of    V 

r«    > 

aJ  ^ 

aJ 

a    u 

(3d 

4>   C   M 

rH  ♦> 

4>       rH 

HH      rl        3 
(Hit*       ll        A 

t  i 

•2  «»  3 

^5    oj 

R^ 

3     n) 

|oS 

e  0 

rH 

•»->  to    ♦-■• 

1 

3 

0 

0$ 

0        03 

> 

1 

X 

35 

P4 

>        H 

H          HO 

< 

-    40    - 


THE  WATER  AND  POWER  ACT  LSBAITS  STAGNATION  OF  INDUSTRY 

This  generation  can  remember  when  California  was 
.nly  an  agricultural  state,  and  had  few  industries.   Today 
it  ranks  eighth  in  the  value  of  manufactured  products,  and 
fifth  in  the  number  of  its  industries.   That  growth  is  due 

.  nly  to  the  development  of  hydroelectric  power  in  abundance 
at  low  rates.   The  demand  for  electric  power  increases  steadi- 
ly from  year  to  year,  and  the  industrial  growth  of  California 
depends  upon  the  ability  of  the  pewer  companies  to  satisfy 
that  increased  demand.    In  order  to  satisfy  that  increased  de- 
mand the  power  companies  must  build  construction  works  to  de- 
velop power  ahead  of  the  demand.   Thus,  in  1922,  they  are 
building  in  order  tj  have  power  frr  the  demand  that  will  come 
in  1923.   But  a  power  company  cannot  afford  to  develop  power 
too  fast  or  too  far  ahead  of  the  demand,  because  when  it  has 
invested  large  amounts  of  capital  in  new  construction  work  it 
must  pay  interest  on  that  capital,  and  the  power  developed  by 
that  capital  must  be  sold  in  order  that  the  interest  on  that 
capital  may  be  paid.    If  mere  pewer  is  developed  than  can  be 
sold  deficits  and  disaster  must  follow.   Consequently,  the 
power  companies  must  exercise  shrewd  business  judgment,  based 
on  experience,  tr  develop  power  fast  enough  to  meet  all  de- 

-ds  from  industry  as  they  occur,  and  yet  not  so  fast  as  to 
tie  up  capital  in  idleness  and  works  that  cannct  pay  their  way. 

All  new  construction  work  is  built  on  money  borrowed 
by  the  corporations  from  the  public,  and  that  is  why  there  is 
a  virtually  almost  continual  sal*  of  new  securities  by  the 
power   companies.    Investors  buy   the  pecuvltieo   cf  power  cem- 

-  41  - 


FARM  irtPROVtMLNTS 
%i*ts  ooo  ooo 


BUILDING  CONSTRUCTION 

1*200  000000 


FACTORY       £  QUI  PMC  NT 

$  J.+OO  000,000 


Mining 
ttrfoco  ooo 


RAILROADS 
4foo.ooo.ooo 


HIGHWAYS 
Si .  ooo.  ooo.  ooo 


POWFff  COMPANIES 
$2,000  000. 000 


*<tio.coo,aeo 


3tkclt  ntwwc 
»«  000.000 


TtLCPnoiC 

$  J  to  000  too 


STATL— CITY  GOVT 
1 311  790  OOO 


none  —ornci  nmNOMHG 
t.'it  000.000 


Can  We  Afford  to  Endanger  This  Program  by  Injudicious  Legislation? 


TEN    YEAR    PROGRAM    OF    EXPENDITl  RES 


1  ''-innate*  of  probable  expen- 
diture* in  twelve  markets  of 
the  Went  ahow  a  figure  Home- 
where  in  the  neighborhood  of 
$15,000,000,000  for  the  next 
ten  year*.  These  figure*  do 
not  take  into  consideration 
the  operating  expense*,  which 
amount  to  several  time*  thi* 
sum  in  amount  and  which 
cover  the  it  em  a  of  wage* 
paid,  money  apent  for  llam| 
coat*,  and  practically  all  ex- 
penditure* for  primary  ma- 
terial*, small  tools  and  like 
factor*  of  production.  The 
figure*  here  given  rover  cap- 
ital expenditures,  new  plant 
or  permanent  equipment, 
building*,  dams,  track  or 
highway*. 


Capital 

t   U7.ooo.aoo 

17..780.000. ... 
..   1.000.000,000 
170.000.000 

I      MoioooW 


Bkjkwan 

City 

Railroad. 
Street    railway* 

Talanhon.a 

Karma  ____.... 

houaaa  .7S.000.000 

implement.  .....       tOO.OM.000 

liricatlon  K0O.0OO.0K 

Minim  .70.000.000..... 

Hulldin*   c.n.tnirtion    „.  4400.000.000 

Ham*    furnlahl**-  170.000.000 

OAV*    and    .tore    furnLhln*       IM.000.000 

Kartorjr    equipment  .  S.400.000.000 

Power  company  construction  1.000.000.000 


Operating  1 
t    41Z.000.eeO 


0400.000,000 


.       011.000.000 


HUeWMM 


Thin  means  that  115,000,000.000  will  be  required  for 
capital  expenditures  in  these  ten  fields  alone  during  the  next 

•■ars.  Even  with  the  output  from  the  major  industries 
of  the  West,  as  tabulated  at  the  beginning  of  thi*  article 
amounting  to  something  like  $15,000,000,000  per  year,  it  is 
obvious  that  most  of  this  money  will  be  required  in  operating 
expenses  with  only  a  small  percentage  of  profit.  The  Want 
cannot  do  all  its  own  financing.  It  will  be  some  time  before 
the  West  can  be  independent  and  part  of  the  value  of  this 
survey  lies  in  the  picture  it  gives  of  the  great  sums  of  m  patty 
which  must  be  attracted  to  this  region,  with  the  reminder 
that  conditions  must  be  made  sufficiently  attractive  to  bring 
them. 


Reprint  from  the  Journal  of  Electricity  and  Western  Industry 


panies  because  they  have  confidence  that  the  State  of  California 
will  maintain  its  present  policy  of  regulated  monopoly,  which, 
while  it  prevents  the  investor  from  obtaining  more  than  a  very 
moderate  return  on  his  money,  secures  his  principal  against  the 
hazards  of  unregulated  competition  which  spells  disaster  to  the 
investor,  as  well  as  to  the  rate-payer.   As  the  Water  and  Power 
Act  is  deliberately  designed,  according  to  Itr.  Rudolph  Spreckels, 
the  Executive  Director  and  Treasurer  of  the  Committee  which  is 
supporting  the  Act,  to  reintroduce  competition  in  public  utility 
service,  it  is  obvious  that  the  investors  will  not  buy  the  se- 
curities of  power  companies  which  face  active  and  desperate  com- 
petition with  the  State  of  California  backed  by  500  millions  of 
dollars.   Consequently  the  power  companies,  by  inability  to  sell 
their  securities,  will  be  unable  to  obtain  new  money  for  ne?/  con- 
struction work.   The  consequence  will  be  that  the  supply  of  power 
will  not  be  able  to  meet  the  demand  in  the  near  future  after  the 
adoption  of  the  Water  and  Power  Act,  and  industrial  growth  of 
California  will  stop.   True,  the  State  proposes  to  invest  500 
millions  of  dollars  in  the  power  business,  but  that  will  be  to 
compete  in  existing  developed  fields  with  the  old  companies,  ac- 
cording to  Mr.  Spreckels,  and  not  to  develop  new  power  to  supply 
new  demands, 

But  even  if  the  power  companies  were  able  to  sell 
their  securities  and  thus  go  forward  with  new  construction  work, 
it  is  a  question  whether  sound  business  sense  would  not  require 

em  to  stop  all  new  work  immediately  upon  the  adoption  of  the 
Water  and  Power  Act.   Hew  construction  work,  to  meet  new  de- 
mands for  power,  as  a  rule  means  serving  lean  territory  at  a 

-  42  - 


less  for  some  years,   if  the  power  companies  must  faoe  fierce 
competition  with  the  -.valor  and  power  board,  backed  by  500  millions 
cf  taxpayers'  money,  their  obvious  strategy  will  be  to  stop  all 
new,  which  means  unprofitable  development,  and  wage  the  rate  war 

thin  the  lines  cf  their  already  established  and  profitable  ter- 
ritory. Wne   will  then  satisfy  the  increasing  demand  fcr  power 
on  which  the  prosperity  of  California's  industry  depends?   Not 
the  power  companies,  because  they  cannot,  and  if  they  could  they 
would  be  foolish  to  do  so.   Not  the  State  of  California,  because 
according  to  Mr.  Spreckeia ,  it  intends  to  invest  the  money  in 
competition  in  alrealy  developed  territory.   Moreover,  if  the 
State  were  to  undertake  the  development  of  new  power  in  new  ter- 
ritory, it  would  take  it  eevoi-al  years  tc  get  under  way,  and  in 
the  meantime  California's  industry  woild  stand  still. 

The  effoct  of  this  stagnation  will  be  reflected  in  the 
earnings  of  every  industry  cf  California,  because  there  is  hardly 
any  industry  that  is  not  in  seme  measure  dependent  upon  the  power 
companies  as  a  servant  providing  p^wer,  a  customer  purchasing 
supplies,  or   an  employer  providing  work. 

The  Staters  borrowing  capacity  is  not  inexhaustible. 
Let  it  be  conserved  f*r  improvements  wj.  Lhj  n  the  scope  of  govern- 
ment.  Let  us  not  burn  up  the  State's  borrowing  power  in  order 
t->  put  California  into  the  highly  technical  manufac turing  busi- 
ness of  producing  and  selling  hydroelectric  power  in  competlvicn 
with  companies  that  are  now  serving  the  public  well  at  very  1-vw 

tea  fixed  by  the  Railroad  Commission. 


-  43  - 


The  Water  and  Power  Act  Fails   to  locate   or  describe  projects 


When  taxpayers  are  asked  tc  vcte  bonds  for  a  city  hall, 
school    cr   other  public   improvement,    they  have  heretofore  been  told 
'.t   it  Trill   cost,   what   it  will   look  like,   where  it  will  be  built, 
when  it  will  be  built   and  who  will   use  it. 

Ycu  may  read  the  Water  and  Power  Act  from  beginning  tc 
end  without   gleaning  one  single  morsel   of   information  about  any  of 
these  vital  matters. 

Five  Hundred  Million  Dollars  Vb   to  be  voted  fcr  power 
developments,  but  not   one   of   them  is  described   or  located.       They 
.a  unknown,    unspecified  and  ur.l coated. 

They  may  be   inside  the   otate   or    outside  the  state;     they 
may  be  steam  plants   or  hydro  plants;      they  may  be  located  on  White 
River  or  Black  River;     they  may  involve  the  purchase  and  development 
rf   land   owned   or  artfully  acquired  by  a  political  henchman  or  his 
friends;     they  may  be   good,  bad   or   indifferent  projects,  but   the  tax- 
payers  ire  tc  have  no  inkling  of  the  facts  until  after  they  vote  the 
money  and  the  all-powerful  Water  and  Power  Board  is  in  the  saddle 
and   on  its  way. 

The  so-called  Act  is  not  even  vague,   misty  cr  uncertain 
".bout  these  matters.       It  is  so  silent  that  the  silenoe  is  ominous. 


-   44  - 


The  Water  and  Power  Act  is  absolutely  silent  as  to 
Plan  or  Policy. 


We  are  asked  to  vote  the  very  tidy  sum  of  $500,000,000.00 
to  out  the  state  in  the  electric  power  "business.   Can  all  the 
people  of  the  state  be  served  under  the  terms  of  the  act  and,  if 
all  cannot  be  served,  what  plan  or  policy  is  to  be  followed? 
No  one  knows  because  the  act  is  silent  as  to  plan  and  policy. 

We  are  asked  to  sign  a  blank  check  and  hope  for  the  best. 

Will  the  7/ater  and  Po-.ver  Board  buy  up  all  the  existing 
power  companies  and  attempt  to  do  the  power  job  for  the  whole 
state?   It  cannot.    The  five  hundred  million  dollars,  gigantic  sum 
though  it  i3,  will  not  be  enough  for  this  purpose.   The  operating 
properties  of  the  existing  power  companies  have  cost  more  than  this 
and  represent  a  larger  investment.    Furthermore,  additional  in- 
vestments in  povier  projects  must  be  made  during  the  next  ten  years 
to  meet  the  needs  of  the  state  and  keep  the  present  power  surplus 
available  for  anticipated  demands.    These  additional  investments 
will  run  from  $500,000,000,00  to  $800,000,000,00,  so  that  much  more 
than  one  billion  dollars  of  capital  will  be  needed  to  serve  the 
state  as  a  whole.   The  Water  and  Power  Board  will  have  less  than 
half  enough  to  take  care  of  the  entire  state  and  must  cut  its 
cloth  according  to  its  purse.   In  other  words,  portions  of  the 
state  only,  and  a  part  of  the  people  only,  can  be  served  under  the 
scheme  proposed, 

Will  the  Water  and  Power  Board  develop  projects  to  eon- 
pete  with  existing  power  companies  and,  by  duplicating  plants  and 
equipment,  seek  to  serve  the  same  territory  and  divido  the  business 
or  get  it  all?   No  one  knows,  because  the  act  is  silent  and  avoids 

-  49  - 


the  question.  Put  if  the  Board  should  adopt  the  policy  of  competi- 
tion, there  wouD d  be  a  long  delay  before  it  could  secure  even  half 
the  business  of  the  existing  companies;  the  board  would  have  to 
compete  against  the  best  and  cheapest  power  developments  now  owned 
by  tho  companies  with  less  attractive  properties  more  expensive  to 
operate.  In  the  meantime,  there  would  b?  the  losses  and  deficits 
which  inevitably  accompany  competition  of  this  kind. 

Will  the  Water  and  Power  Board  build  plants  and  confine 
itself  to  serving  ter  itor;  not  new  served  by  any  existing 
company?   Again,  no  one  knov s ,  because  no  plan  or  policy  is  de- 
fined in  the  Act,   The  profitable  markets  are  already  occupied  and 
the  most  economic  power  sites  are  already  owned  and  developed. 
If  this  policy  were  adopted,  the  Board  would  be  compelled  to  devel- 
op second  choice  power  sites  and  operate  in  unprofitable  territory, 
financial  loss  would  be  the  certain  result. 

The  Board  cannot  serve  the  whole  state;  it  probably  will 
not  face  the  certain  financial  loss  of  competition  or  service 
solely  in  areas  now  unoccupied. 

What,  then,  will  it  do?   No  one  knows,  because  the 
Act  fixes  no  course  for  the  Board.   All  is  left  to  its  wise  dis- 
cretion.  But  there  is  just  one  thing  left  which  the  Board  might  do( 

It  might  undertake  to  serve  sections  of  the  state  by 
taking  over  the  existing  companies  serving  those  particular  sec- 
tions and  leave  the  remainder  of  the  state  to  be  served  under 
present  conditions. 

But  state  bonds  must  then  be  used  to  serve  only  portions 
of  the  state  and  only  a  part  of  the  people;  all  the  taxable  prop- 
erty in  the  state  must  be  mortgaged  to  secure  their  payment;  all 
the  taxable  property  of  the  state  must  make  up  the  taxes  lost  by 

-  4fl  - 


•' 


. 


■ 


;:.    Y 


turning  tax-paying  properties  into  tax-free  properties  through 
state  ownership,  and  no  compensating  "benefits  could  possibly  come 
to  the  taxpayers  in  the  outside  sections,  because  they  would  not 
enjoy  the  blessings  of  electric  service  by  the  state.   They  would, 
however,  be  assured  the  high  privilege  of  contributing  their  share 
of  th.j  loot  taxes  and  being  liable  for  the  payment  of  principal  and 
interest  of  the  bonds. 

What  sections  of  the  state  will  be  left  out  and  what  sec- 
tions will  be  "taken  in"?    "c  one  knows  because  the  act  does  not  say 
But  one  may  venture  the  prediction  that  it  will  be  "pull  and  haul" 
and  may  the  most  votes  win1. 


-  47  - 


DOE  3  IT  BSirZFIT  RATEPAYERS  TO  PAY  OFF  THE  CAPITAL 
IL     2   Hi  PUBLIC  UTILITY  SERVICE? 

The  Water  and  Power  Act  expressly  prescribes  that 
the  hoard  shall  establish  such  rates  as  will  provide,  in  ad- 
dition to  expenses  of  operation,  maintenance,  depreciation, 
insurance,  and  reserve  for  losses,  funds  tr  pay  the  principal 
and  interest  of  all  bonds  issued  as  the  sane  fall  due.   In 
other  words,  the  rates  to  be  established  by  the  water  and 
power  board  must,  in  addition  to  the  cost  of  power,  amortize 
or  pay  off  the  investment* 

That  is  one  of  the  most  unreasonable  provisions  in 
the  Act.   It  requires  one  generation  to  pay  more  than  cost  . 
for  power  in  order  that  a  succeeding  generation  may  get  power 
at  less  than  cost. 

The  private  corporations  never  require  the  ratepayers  to 
pay  back  the  original  investment.   The  original  investment 
stays  in  the  business  as  long  as  the  corporation  served  the 
ratepayers. 

Suppose,  for  example,  a  ratepayer's  contribution  to  the 
water  and  power  board  in  this  surcharge  on  his  rates  to  pay  off 
the  capital  investment  in  the  service,  amounts  in  the  course  of 
25  years  or  50  years,  as  the  case  may  be,  to  one  thousand  dol- 
lars.  At  the  end  of  that  time  he  has  parted  with  his  thousand 
dollars,  and  his  rate  has  been  decreased  by  interest  on  that 
thousand  dollars,  amounting,   ay,  to  $60  a  year.  He  has  a 
lower  rate,  but  he  doesn't  own  the  one  thousand  dollars.  When 
he  dies  or  moves  away  from  the  territory  served  he  gets  no 
further  benefit  from  tht't  one  thousand  dollars.  The  benefit 

-  48  - 


goes  to  the  next  Feneration  of  ratepayers. 

Suppose,  however,  that  instead  of  being  served  v/ith  power 
by  the  water  and  power  board,  he  was  served  during  the  same 
period  of  25  years  or  50  years  by  a  private  corporation  under 
such  regulation  as  we  have  in  California.   He  would  have  ob- 
tained during  that  period  power  at  cost  as  determined  by  the 
Railroad  Commission,  He  would  not  have  been  required  to  con- 
tribute his  $40  or  $20  a  year,  as  the  case  might  be,  toward 
the  payment  of  the  capital  invested  in  the  service.   Hence, 
his  rate  during  that  period  would  have  been  lower  than  the 
rate  which  he  would  have  had  to  contribute  to  the  water  and 
power  board.   If  he  pleased,  he  could  take  that  §40  or  $20 
each  year  and  invest  it  in  bonds  of  the  power  company  serving 
him  with  power  ,  or  in  any  other  company,  and  the  money  would 
earn,  let  us  say,  6  per  cent,  so  that  when  the  total  saving 
amounted  to  one  thousand  dollars  he  would  have  a  one  thousand 
dollar  bond  earning  $60  a.  year .   His  rate  then  would  not  be 
reduced  below  cost,  but  he  would  be  getting  the  $60  a  year, 
and  he  would  own  the  one  thousand  dollars.   If  he  died  he 
could  leave  the  one  thousand  dollar  oond  to  his  wife  or  family. 
If  he  moved  away  from  the  territory  served  he  could  take  the 
one  thousand  dollar  bond  with  him. 

In  other  words,  the  water  and  power  act  proposes  to  mulct 
the  first  generation  of  ratepayers  for  the  benefit  of  the  second 
generation  of  ratepayer c.  The  present  system  requires  each  gen- 
eration of  ratepayers  to  pay  the  cost  of  the  service  which  it 
receives.   It  doesn't  take  away  the  ratepayer  s'  savings  as  the 
water  and  power  board  is  required  to  do. 

-  49  - 


I&  Iffi  a?  I  VAT?  PQv^  CQ^gAyi3S  2S2£DJ1  HIS  HAilBAL 
RESOURCES  OF  CALIFORNIA? 

Advocates  of  the  Water    and  Power   Act  assert  that  the 
State  of  California  must  go  into  the  power   business  in  order   to 
prevent   the  private   companies  from  grabbing  the  natural  re- 
sources of  the  State  and  despoiling  the  people   of  their   heritage. 

Pov/er    is  not  a   "natural  resource"  any  more  than  wheat 
is.     Power    is  a  manufactured  product.      In  order    to  make  electric 
energy  it  i3  neoessary  first  to  turn  a  wheel.     When  oil  and  coal 
were  cheap   steam  was  used  to  turn  the  wheel.      In  order   to  make 
power   cheaper  by  saving  fuel  the  power    companies  now  use  the 
force  of  falling  water    to  turn  the  wheel  or   prime  mover.      In 
California  where  the  flow  of  rivers   is  inconstant  they  dam  a 
stream  to   store  the  water   and  thus  provide  a  uniform  flow,   and 
then  they  drop  the  water   through  a  pipe  to  a  water  wheel.      The 
water  passes  over  the  wheel  undiminished  and  unimpaired  and  is 
then  returned  to  the  bed  of  the   stream, 

A  timber  company  cuts  and  removes  the  forests,   an  oil 
company  drains  away  the  oil,  a  mining  company  takes  the  coal  or 
the  metal  out  of  the  ground,  but   a  power  company  takes  nothing 
from  the  public  domain.      On  the  contrary,   it   conserves  the 
State's  natural  resources  in  the  true  sense,    for  it  harnesses 
the  idle  streams  and  makes  them  work  for  mankind. 

There  is  no   such  thing  in  California  as  a  power  com- 
pany's acquiring  water  rights  or  power   sites  to  the  public   detri- 
ment.    Water  rights  are  nothing  except  as  they  are  utilised  and 
a  power  company  in  California  may  not  utilize  either  water  or  a 
power  site,    or  spend  money  in  developing  it,   except  under  permit 


from  the  State  government  and  upon  a  showing  that  it  is  necessary 
for  the  use  and  convenience  of  the  public. 

The  statement,  sometimes  made,  that  the  people  give 
their  property  rights  or  natural  resources  to  the  power  com- 
panies and  are  then  compelled  to  pay  interest  on  the  value  of 
the  property  thus  given  away  is  a  bit  of  fiction  so  far  as 
California  is  concerned  since  our  policy  of  regulation  has 
been  in  force. 


-  51  - 


IMPORTANCE  OF  SOUKD  REGULATION  A3  OPPOSED  TO 
POPULAR  REGULATION 


1.  The  power  industry  is  fundamental  to  western  pros- 
perity. 

2.  When  there  is  a  power  shortage  it  means  that  all  in- 
dustry is  held  up. 

3.  In  1S18,  when  government  restrictions  had  prevented 
the  power  companies  from  doing  the  necessary  construction  work 
during  the  previous  year,  and  a  dry  season  caused  a  shortage  of 
water  for  power  generation,  some  15'CO  farms  were  not  developed  in 
the  San  Joaquir.  Valley  because  their  owners  could  not  get  their 
applications  filled  for  electric  power.   This  meant  some  3,000 
buildings  which  were  not  constructed  and  orders  for  machinery, 
paint,  clothing,  etc.  lost,  which  would  have  come  from  these  1^00 
farms.   Thi3  is  but  a  similar  thing  to  what  was  happening  in  all 
industry  in  all  sections  of  the  country,  and  in  Ontario,  Canada, 
the  shortage  of  power  was  most  marked.   In  California,  the  vision 
and  daring  of  her  engineers  under  private  initiative  publicly  re- 
gulated has  made  this  State  world  famous  in  her  engineering  ac- 
complishments.  Here  are  some  of  her  accomplishments  that  dazzle 
the  imagination: 

(1)  The  first  long  distance  high  voltage  transmission 
in  the  world. 

(2)  The  most  gigantic  string  of  high  tension  power 
lines  in  the  world. 

(3)  The  world's  largest  system  of  electric 
generation. 


-  52  - 


(4 

(5 
(6 
(7 

(3 

(9 

do 
(n 

(12 

(13 

(14 

(15 

(16 


The  record -breeding  high  voltage  hydroelectric 
nsraission. 

The  world's  greatest  electrically  operated 
gold  dredge. 

The  world's  greatest  electrically  operated 
petroleum  refinery. 

The  world's  greatest  electrically  operated 
sugar  factory. 

The  world's  greatest  electrically  operated 
cement  mill. 

The  largest  high  voltage  submarine  cable. 

The  second  longest  aerial  cable. 

The  most  powerful  high  head  reaction 
turbine. 

The  most  powerful  high  head  inpulse  turbine. 

The  largest  trar.sf orr.er  units  ever  designed. 

The  greatest  and  largest  electrically 
pumped  irrigation  district  in  the  v/orld. 

The  most  intensive  use  per  capita  of  elec- 
tricity existent  in  the  world. 

Cheapest  rates  for  power  in  the  v/orld. 


4.   The  ability  of  the  power  industry  to  live  un  to_  its 
obligations  is  directly  dependent  upon  the  fair  attitude  of  the 
body  regulating  r£._tes . 

5«   It  is  significant  thRt  California,  with  a  Railroad 
Commission  recognized  as  one  of  the  most  progressive  in  the 
country,  has  been  able  to  meet  its  power  requirements  without 
difficulty  through  the  entire  period  of  the  recent  business  de- 
pression.  Its  demands  for  additional  electric  power  have  grown 
by  650,000,000  kilowatt  hours  during  the  past  year  and  over 
♦50,000,000  has  been  spent  during  1921  by  power  companies  to  meet 


-  53  - 


the  increased  requirements. 

6.  This  was  made  possible  "because  investors  had  faith 
in  the  power  companies  and  in  the  good  judgment  and  faith  of  com- 
mission regulation. 

7.  Could  California  have  stood  out  as  the  most  prosper- 
ous district  of  the  world  through  this  entire  period  of  depression 
if  its  power  industry  had  been  crippled?   Would  the  situation 
have  been  helped  by  a  policy  of  regulation  designed  to  reduce  rates 
regardless  of  economic  facts  --  in  other  words,  was  it  better  to 
keep  the  public  utilities  sound  or  to  make  them  unsound? 

8.  The  proposed  Water  and  Power  Act  means  a  rejection 
of  the  principles  of  sound  regulation  --  placing  rate  fixing 
power  again  in  the  hands  of  those  who  generate  the  power  -  a 
reversion  to  the  situation  which  existed  in  this  State  before  the 
inauguration  of  the  Railroad  Commission. 


54  - 


t:-:b  pg.ysRs  Atrp  is  o^  tje  California  railroad  c.         3ION 

The  Public  Utilities  Act  of  California  confers  upon 
the  California  Railroad  Commission  the  following  all-embracing 
jurisdiction,  Article  3,  Section  31. 

"The  Railroad  Commission  is  hereby  vested  with  power 
and  jurisdiction  to  supervise  and  regulate  every  public 
utility  in  the  State,  and  to  do  all  things  whether  herein 
specifically  designated  or  in  addition  thereto,  which  are 
necessary  or  convenient  in  the  exercise  of  such  power  and 
jurisdiction. " 

In  this  enactment  the  Railroad  Commission  is  empowered 
to  establish  rates,  fares,  tells,  rentals,  charges,  classifica- 
tions, rules,  regulations,  contracts  and  schedules,  and  in  every 
way  to  supervise  and  control  the  power  development  of  California, 
and  express  provision  is  set  forth  in  the  enactment  that  every 
public  utility  shall  obey  and  comply  with  every  requirement  of 
every  order,  decision  or  regulation  prescribed  by  the  Commission, 
and  how  well  it  has  performed  its  duty  is  a  matter  of  such  out- 
standing accomplishment  that  the  eyes  of  the  nation  have  been 
constantly  focused  upon  the  success  cf  regulation  in  California, 
and  California  has  constantly  been  held  before  economists  of 
the  nation  as  the  one  outstanding  leader  in  this  nature  of 
present  day  economic  attainment. 


-  55  - 


r-m   UTILITY  COMPA  SC  A±i 

8  P3R  CEOT  R5TURN       R5GULATI0Z-? 

Under  regulation  the  privately  owned  public  utilities 
are  not  guaranteed  an  8  per  cent  return.  When  the  Railroad  Com- 
mission fixes  an  8  per  cent  return,  it  usually  estimates  what, 
in  its  judgment,  the  operating  and  maintenance  expenses  should 
be,  makes  what  in  its  judgment  it  considers  a  reasonable  allow- 
ance for  depreciation,  then  adds  8  per  cent  on  the  investment  in 
the  property  in  actual  use,  the  total  being  the  amount  which  the 
utility  is  entitled  to  earn.   It  then  fixes  rates  which  will 
yield  this  amount,  if  the  utility  does  the  volume  of  business 
the  Commission  estimates  it  will  do. 

If  the  Commission  overestimates  the  business  or  under- 
estimates the  expenses  or  the  depeciation,  the  utility  will  not 
earn  the  8  per  cent  it  is  supposed  to  earn. 

In  1916  the  Railroad  Commission  refused  to  allow  the 
Northern  California  Power  Company  to  earn  any  return  on  £1,500,000 
invested  in  water  power  plants,  which  in  the  opinion  of  the  Com- 
mission had  been  built  in  advance  of  the  requirements  of  the  ser- 
vice.  The  stockholders,  therefore,  had  to  carry  the  burden  of 
this  investment  without  any  help  frcm  the  ratepayers. 

Out  of  the  return  allowed,  the  utility  company  must 
provide  for  the  following: 

(a)  Bond  interest,  and  amortization  of  bond  discount. 

(b)  Pixed  charges  on  property  not  in  use. 

(c)  Dividends  to  stockholders. 

(d)  A  surplus  to  take  care  of  the  risks  and  contingen- 

cies of  the  business,  periods  of  depression,  etc. 

-  M  - 


Effect  of  ;      and  Po-ver  Act  on  Taxes. 

There  are  just  three  things  that  happen  to  the  taxpayer 
if  the  Water  and  Power  Act  becomes  a  law. 

Flr3t.    He  assumes  a}l  the  risks  of  management  by  a 
political  board  of  five  nen,  given  $500,000,000.00  to  spend  as 
they  see  fit.   The  taxpayer  assumes  this  risk  because  the  act  ex- 
pressly mortgages  his  property  to  pay  the  principal  and  interest 
of  the  bonds.    If  the  political  board  cannot  get  the  principal 
and  interest  out  of  its  business  ventures,  it  will  get  the  money 
out  of  the  taxpayer.   The  mortgate  on  his  property  makes  this 
certain. 

Second.    It  is  going  to  take  this  political  board  some 
time  to  "get  started."   A  paying  business  cannot  be  built  up 
over  night.   The  Water  and  Power  Act  gives  the  Board  a  revolving 
fund  of  $5,000,000,00  for  the  purpose  of  "getting  started." 
The  taxpayer  must  pay  the  interest  on  this  revolving  fund  until 
the  revenues  of  the  board  are  sufficient  to  meet  the  interest. 
The  act  promises  that  then  the  board  will  pay  the  money  back  to 
the  taxpayer.   But  there  is  no  mortgage  on  the  board's  property 
to  make  this  promise  good  and  no  one  knows  whether  the  revenues 
will  ever  catch  up. 

Third.   Every  time  the  political  board  causes  a  bond 
to  be  sold,  and  spends  the  money,  it  will  cost  the  taxpayers  of  the 
state  more  taxes.   There  isn't  any  avenue  of  escape  from  increased 
taxes,  if  the  act  is  adopted.   It  doesn't  make  any  difference, 
whether  the  board  is  good  or  bad,  successful  or  unsuccessful. 

Here  is  the  simple  story  of  the  situation  the  taxpayers 
face  under  this  so-called  act. 

-  57  - 


1.  The  five  hundred  million  dollars  to  be  derived  from 
the  sale  of  State  bond3  will  Le  invented  in  v/ater  and  power  enter- 
prises, all  of  which  will  be  exempt  from  taxation. 

2.  The  tax  burden  upon  locally  assessable  property  in 
California  was  officially  reported  to  the  Legislature  in  1921  by 
the  State  Board  of  Equalization  (for  the  fiscal  year  1920-21)  to 
be  1.63  per  cent  on  each  $100.00  of  taxable  value  of  property  in- 
volved.  For  the  year  1921-22  it  is  likely  that  the  rate  will  be 
very  close  to  2.00  per  cert. 

3.  The  five  hundred  million  of  dollars  which  will  be 
so  invested  in  State  bonds  is  now  invested  in  other  forms  of 
beneficial  enterprises  on  which  taxes  are  paid.   That  five 
hundred  million  of  dollars,  therefore,  at  the  present  time,  is 
contributing  at  least  1.63  per  cent  thereof,  or  $8,150,000.00 
annually  in  taxe3,  all  of  which  will  be  lost  to  the  public  if 
the  five  hundred  million  of  dollars  be  taken  out  of  taxable  prop- 
erty and  invested  in  tax-free  bonds,  or  if  the  bond  money  be  used 
to  buy  property  now  paying  taxes. 

4.  That  enormcus  loss  of  revenue  to  the  State  must  be 
made  up  by  the  other  tax  payers* 

5.  The  Light,  Heat  and  Power  Companies  paid  in  State 
taxes  alone  for  the  fiscal  year  1921-22  the  sum  of  $6,794,538.00. 
In  addition  to  state  taxes,  the  light,  heat  and  power  companies 
pay  approximately  $2,500,000.00  annually  in  other  taxes.  In  the 
event  of  the  fulfillment  of  the  program  of  the  proponents  of  the 
bond  issue  this  revenue  would  be  entirely  lost  to  the  State,  either 
through  the  extinction  of  existing  plants  through  competition,  or 
through  the  acquisition  by  the  proposed  water  and  power  board  of 

-  58  - 


property  with  funds  that  the  bond  issue  would  provide. 

In  the  present  critical  Condition  of  the  State's  finances, 
the  inevitable  loos  in  taxes  is  a  very  serious  matter. 

The  burden  of  the  loss  will  be  shifted  to  other  property 
and,  when  the  shift  comes,  it  will  mean  increased  taxes  to  make  up 
the  loss. 


-  59  - 


HERE  IS  WHERE  THE  PHILOSOPHY  OF  THOSE  'WHO  FAVOR  THE  PROPOSED  WATER 
AND  POWER  ACT  g[  CALIFORNIA  WILL  LEAD  US  SHOULD  IT  BE  ADOPTED. 

LET  US  BEWARE! 


1.  The  creating  of  a  vast  self-perpetuating  political 
machine  (hiring  and  firing  are  wholly  within  the  control  of  the 
five  super-governors  of  the  state  who  may  he  on  the  governing 
hoard ) . 

2.  The  opening  of  metal  mines,  cement  works,  textile 
mills,  machine  shops,  canneries,  laundries,  etc. --under  state  con- 
trol in  competition  with  private  concerns. 

3.  Cut-throat  competition  with  present  power  systems. 
The  duplication  of  transmission  lines,  distribution  systems  and 
generating  plants  with  the  ultimate  resulting  higher  costs  to  the 
consumer. 

4.  The  abandonment  of  the  principles  of  regulation  and 
the  resulting  unfair  distribution  of  power  costs  between  consumer: 
determined  by  the  particular  bias  of  those  in  control. 

5.  The  development  of  the  state's  resources  by  that 
portion  of  the  state  which  asks  for  them  first — the  furthering  of 
the  interests  of  one  section  of  government  served  at  the  expense 
of  another  which  receives  its  power  from  private  companies. 

6.  The  increase  of  taxes.   Owing  to  the  lesser  amount 
of  taxes  paid  by  the  district  doing  away  with  its  public  utilit 
the  remainder  of  the  stcte  and  other  sources  of  revenue  will  have 
to  bear  a  larger  share. 

-  60  - 


7.  The  lessening  of  market  value  of  all  private  secur- 
ities placed  on  the  market,  owing  to  the  competition  of  this 
great  block  of  tax  free  bonds. 

8.  High  power  rates  to  farmers.   Owing  to  their  dis- 
tance from  power  sources  and  the  long  stretch  of  lines  needed  for 
each  farm,  costs  will  grow  beyond  the  ability  of  the  farmer  to 
meet  them. 

9.  The  faiir  of  certain  portions  of  the  enterprise 
to  meet  required  returns ,  especially  during  the  first  few  years, 
and  the  consequent  levying  of  a  tax  for  payment  of  bonds  and  in- 
terest. 

10.   Increasing  burdens,  through  the  gradual  growth  of 
the  system — a  tendency  more  and  more  to  spread  into  related  enter- 
prises, to  take  up  side  lines  of  manufacturing,  to  control  irriga- 
tion, as  well  as  power.   A  growing  feeling  of  irritation  on  the 
part  of  certain  sections  of  the  state  against  others  who  have 
greedily  reached  for  all  in  sight  and  shifted  tax  burdens  from 
their  own  shoulders  to  those  of  their  neighbors.   Numerous  weak- 
nesses and  failings  in  the  Act,  which  are  not  now  apparent  but 
which  will  develop  in  operation.   At  the  same  time  a  growing 
power  on  the  part  of  the  controlling  board  and  a  great  difficulty 
in  bringing  about  a  reform  through  popular  vote. 


-  61  - 


1  TAX-EXEMPT"    FARCE. 

It  is  estimated   that   there  are  approximately  $30,000,000,000 
•nrcrth  of  tax-exempt  or   semi  tax-exempt  public  improvement   or  govern- 
nt  "bonds   outstanding, 

Taj s  means  that  the  income  derived  from  such  securities 
escapes  the  "burden  of  taxation  which  taxable  industry  and  property 
must  make  up. 

Figuring  that  the  020,000,000,000  is  paying  the  holders 
pf  the  bends  a  return   of  5  Per   cent,    the   government  is  losing  the 
tax  en  income  which  it   should  receive  ft  cm  the  greater  part    of  the 
$1,^00,000,000  these  bonds  return  the  holders  annually  in  interest. 

Industry  or  agriculture  which  produced  .$1,500,000,000  re- 
turn annually  would  be  paying  a  laige  part   of  this  amount  to  city, 
county,    state   or  federal   government  through  taxes   of  various  forms. 

Yet   this   enormous  income  from  bonds   slides   cut  from  under 
paying  any  part   of  the  tax  burden. 

Here  is  a  logical  point  to  start   to  reduce  the  tax  bill   — 
discontinue  further  issuance   of  tax-exempt  securities  v.-hich  handi- 
cap private   industry  in  obtaining  funds  and  add  a  double  burden  tz 
remaining  taxable  property  and  taxpayers. 

The  so-called  California  Water  and  Power  Act  proposes  to 
add  $500,000,000.00  more  to  the  already  huge  total   of  tax-free  bonds 
and  tax-free  property. 

California  is  losing  right  now  approximately  $20,000,000.00 
per  annum  in  taxes  due  to  federal,    state  and  local  tax-free  bonds. 

Shall  we  add  another  haif-billicn  to  the  tax-free  list  and 
keep  on  until  the  last  lone  farm  is  left  in  private  ownership  to  pay 
all  tho  taxes? 


-  62  - 


TAXES  IN  CALIFORNIA. 

Every  one  pays  taxes. 

Some  of  us  pay  taxes  directly  to  the  city,  county,  state 
and  federal  governments. 

Some  of  us  pay  taxes  indirectly  in  our  rent,  in  our  gas 
and  electric  Dills,  in  our  railway  fares,  in  our  purchases  of  food 

■ 

and  clothing. 

It  doesn't  make  any  difference  whether  we  pay  directly 
or  indirectly.    The  cost  is  there  just  the  same.  We  are  all 
galled  and  sore  from  the  burden.    Let's  see  what  has  happened  in 
the  last  ten  years  in  California, 

1.  The  aggregate  costs  of  state,  county  and  municipal 
governments  in  California  have  increased  231  per  cent  for  the  ten 
years  ending  June  30,  1921, 

2.  The  public  debts  of  California  have  increased  242 
per  cent  in  the  same  ten  years. 

3.  In  the  single  year  ending  June  30,  1921,  the  state 
and  its  subdivisions  expended  $27,559,297  for  interest  on  and  re- 
demption of  public  debt. 

Has  the  growth  of  the  state  justified  these  startling 
increases  and  this  heavy  burden  of  interest  charges  and  installment 
payments  on  public  debts?   Most  emphatically  it  has  not. 

While  we  have  been  increasing  our  governmental  costs 
within  the  state  231  per  cent  and  our  public  debts  242  per  cent, 
our  population  has  increased  about  45  per  cent  and  our  taxable 
wealth  has  increased  by  not  more  than  90  per  cent.    Some  authori- 
ties place  the  increase  in  taxable  wealth  at  not  more  than  60  per 
cent. 

Our  expenditures  and  our  liabilities  have  outrun  our 

-  5Z   - 


resources  and  our  grov.      Why? 

Simply  because  we  have  been  unduly  extending  the  func- 
tions of  government.   V/e  are  getting  more  government  all  the 
time  whether  we  need  it  or  not.   Proposals  for  more  boards, 
more  commissions  have  bobbed  up  year  after  year  and  we  have  ac- 
cepted most  of  the  proposals. 

The  boards  and  commissions  demand  money,  they  secure 
appropriations,  hire  employees  and  the  costs  of  government  in- 
crease 231  per  cent  in  ten  years'. 

It  is  estimated  that  fifteen  million  people  in  the 
country  are  on  a  public  pay  roll  of  one  kind  or  another.   In 
California  alone,  there  are  over  two  hundred  thousand  people  con- 
nected with  some  government  pay  roll. 

It  is  now  proposed  to  issue  $500,000,000.00  of  state 
bonds  under  a  qcn-called  Water  and  Power  Act,  turn  this  money 
over  to  a  political  coard  of  five  men  with  authority  to  employ  as 
many  people  as  they  wish  without  regard  tc  civil  service  rules. 
If  this  process  keeps  up,  there  will  be  no  room  on  the  sidewalks 
for  the  taxpayer. 

But  much  more  serious  to  tho  taxpayer  than  his  place 
on  the  sidewalk  is  the  fact  that  as  our  public  debts  have  in- 
creased, so  have  our  costs  of  government  increased. 

The  proposed  $50 J, 000 ,000. 00  bond  issue  will  increase 
the  state's  public  debt  seven  times  over  and  the  total  public  debt 
within  the  state  about  two  and  one-half  times.   It  is  time  to  call 
a  halt. 

The  hope  of  the  taxpayer  lies  in  better  and  more  efficient 
government.   The  latter  will  come  only  with  less  gov  eminent ,  not 
with  more  government. 

-  64  - 


::ici?al  aviasRSHi?  and  taxes  in  los  angblbs 

The  experienc  \   of  the  City  or  1.0s  Angeles  has  been  extensively 
quoted  to  support  tho  theory  that  municipally  ovmed  utilities  supply 
more  satisfactory  service  and  at  lower  rates  than  privately  owned 
utilities.  A  very  careful  analysis  of  the  Los  Angeles  situation  re- 
veals the  following  conditions: 

1st,   Rates  for  both  water  and  electricity  are  now  higher 
than  they  formerly  were  under  private  ownership  in  Los  Angeles. 

2nd.    The  taxpayers  have  been  required  to  pay  $24,353,567 
during  the  past  fifteen  years  to  pay  fixed  charges  on  public  utility 
bonds,  in  addition  to  higher  rates  for  service. 

3rd.   The  interest  and  sinking  fund  requirements  for  water 
and  power  bonds  for  the  current  fiscal  year  amount  to  $3,621,238,  of 
which  $600,000  has  been  aporopriated  from  water  department  revenues 
and  $150,000  from  power  department  revenues,  leaving  $2,871,238,  or 
nearly  80#  of  the  total,  to  be  collected  from  taxpayers, 

4th.   There  are  outstanding  at  present,  bonds  issued  to  fi- 
nance the  City's  water  and  power  enterprises  amounting  to  $46,849,80") 
which,  under  the  present  palicy  of  the  city,  will  have  to  be  paid 
from  funds  raised  by  taxes.   During  the  past  fifteen  years,  and 
during  the  current  fiscal  year,  nearly  all  the  interest  charges  were 
also  paid  from  tax  funds,   If  the  same  policy  is  continued,  the  tax- 
payers of  Los  Angeles  are  confronted  with  a  burden  of  more  than 
$90,000,000  during  the  next  thirty  years  on  account  of  the  municipal 
utility  ventures.   AND  THEY,  TOO,  WERE  PROMISED  IN  THE  BEGINNING 
THAT  MUNICIPAL  OWNERSHIP  WOULD  NOT  INCREASE  TAXES. 


-  65  - 


EFFECT  OF  WATER  AND  POWER  ACT  OK  TAXT 

If  the  Water  and  Power  Act  is  adopted  by  the  people  the 
five  hundred  million  dollars  to  be  derived  from  the  sale  of  State 
bonds  will  be  invested  in  water  and  power  enterprises,  all  of  which 
will  be  exempt  from  taxation. 

The  tax  burden  upon  locally  assessable  property  in  Califor- 
nia was  officially  re  sorted  to  the  Legislature  in  1921  by  the  State 
Board  of  Equalization  (for  the  f local  year  1920-21)  to  be  I.63  per 
cent  on  each  $100.00  of  assessed  value  of  the  property  involved. 
For  the  year  1921-22  it  is  likely  that  the  rate  will  be  very  close 
to  2.00  per  cent. 

Presumably  the  five  hundred  million  of  dollars  which  will 
be  so  invested  in  State  bonds  is  now  invested  in  other  forms  of 
beneficial  enterprises  on  which  taxes  are  paid,  That  five  hundred 
million  of  dollars,  therefore,  at  the  present  time,  is  contributing 
at  least  1,63  per  cent  thereof,  or  $8,150,000,00  annually  in  taxes, 
all  of  which  will  be  lost  to  the  public  if  the  five  hundred  million 
of  dollars  be  taken  out  of  taxable  property  and  invested  in  tax  free 
bonds. 

That  enormous  loss  of  revenue  to  the  State  must  be  made  up 
by  the  other  tax  payers. 

Viewed  in  another  way,  it  can  be  stated  that  five  hundred 
millions  of  dollars  invested  in  light,  heat  and  power  enterprises 
would  produoe  approximately  one  million  kilowatts  per  installed  ca- 
pacity based  upon  approximate  cost  of  existing  plants.   The  revenue 
from  one  million  kilowatts  installed  would  be  approximately  one  hun- 
dred million  dollars  per  annum  (based  upon  ratio  of  earnings  to  in- 

-  66  - 


stallation  of  existing  plants)  the  tax  upon  which  at  the  percent- 
age of  the  gross  receipts  applicable  to  electrical  companies  of 
$7.50  per  $100.00  v:ould  be  $7,500,000.00  which  would  represent 
the  annual  loss  to  the  State  in  future  taxes  if  the  property  were 
exempt  as  it  would  be  when  owned  by  the  State. 

The  Light,  Heat  and  Power  Companies  paid  in  State  taxes, 
for  the  fiscal  ye'ir  1921-22  the  sum  of  $6, 794, 538. 00,  which  is 
seventeen  per  cent  of  th^  total  revenue  of  the  State.   In  the 
event  of  the  fulfillment  of  the  program  of  the  proponents  of  the 
bond  issue  this  revenue  would  be  entirely  lost  to  the  State,  either 
through  the  extinction  of  existing  plants  through  competition,  or 
through  the  acquisition  by  the  proposed  water  and  power  board  of 
property  with  funds  that  the  bond- issue  would  provide. 

In  the  present  critical  condition  of  the  State's 
finances,  the  inevitable  loss  in  taxes  is  a  very  serious  matter. 

This  computation  of  loss  does  not  take  into  account  the 
amount  of  taxes  that  the  State  would  have  to  collect  in  order  to 
make  good  possible  losses  in  operation  of  the  projects  to  be 
acquired  or  developed  with  the  five  hundred  million  dollars. 


-  67  - 


WHAT  PROPONENTS  OF  T  7PQBBD  W/.TER  AMD  PQV/ER  ACT 

SAJf  REGAPPTNO  TH3  CITY  AND  ?PW?R  FOR  LOS  _  3S 

Proponents   of  the  Water  ard  Power  Act  are  lcud  in 
their  statements   claiming  that  because  the  City  of  Los  Angeles 
is  partially  supplied  with  water  and  power   owned  by  the  munici- 
pality itself  this  fact  accounts  far  the  manufacturing  growth 
of  the  southern  metropolis  during  the  past  five-year  period. 
The  City  of  Berkeley  owns  neither   its  water  ncr  its  power,    nor 
does  the  City   of   Oakland.        Alameda  purchases  power  at  whole- 
sale from  a  publicly  regulated  power   company  and  sells  it  to 
certain  classes   of   citizens,    except  in  one  instance,   notably, 
the   supply  of  power  fcr  the  great   shipbuilding  interests   of 
that   city.       Nor  does  San  Francisco  own  its  water   supply  nor 
its  power  supply.        if  the  arguments   cf  the   southern  city  are 
well  placed,    that  water  and  power  have  had   so  much  to  do  with 
that   city' 8  manufacturing  growth.,    then  the   fabulous   increases 
that  have  taken  place   in  the  northern  section  of  the  State  in 
manufacturing  during  the  past  five  years,   1914-  to  1919 •  which 
have  recently  been  given  out  by  the  United  States  Census  re- 
ports,  are  a  striking  proof  of  the  effects   of   soundly  regulated 
publio  utilities  under  private  ownership  which  serve  these  grow* 
ing  ccmrauniti  The  present  flourishing  condition  of  manufac- 

turing in  the  centnl   portion  of  the  State  is  well  banne  out  by 
the  Census  figures,  which  are  as  follows: 


-  68  - 


City 

n  Franci 
Berkeley 

eland 
;  Alameda 
;Lo3  Angeles 


facturing  Growth  jji  California  Cities 

'ue  of  Oitnut 

Ou. 

,       L.OOO 


28,33.°.,  000 
134,756,000 

25, 440. COO 
279, 327, COO 


Increase 

167"ojf" 

287. 0# 
372. 5£ 
813. 0# 
170. 0# 


pital   Invited  as   Shorn  "by   1919   Census 


City 

San  Francisco 
Berkeley 
Alameda 
Oakland 
L03  Angeles 


City 

San  Franci  sco 
Berkeley 
Alameda 
Oakland 
Los  Angeles 


Caoital   Invested 

$326  ,398,000 

16,565,000 

11,312,000 

118,882,000 

158,361,000 


Increase 

124 ,  a 

184. 9^ 
220. 0# 
226. 0% 
56. 


?r\r.vjv:f  Korseuower 


1914 


1919 


61,818 

3,503 

3,492 

18,590 

64,665 


99,748 

7,500 

9,306 

50,832 

94,876 


Growth 


61. 4# 
114. 3# 
166. 
163. 5% 

46.7* 


Los  Angeles  Claims 

In  a  publication  issued  by  the  Los  Angeles  Chamber  of 
Commerce   in  1919   it  was  stated  that  the  value  of  manufactured 
products  was  $618,000,000.      Actually  the  value  was  $279,327,000 
for  the  City  of  Los  Angeles,   and  $413,009,916  for  the  County  of 
Los  Angeles. 

The  five  counties  around  the  San  Francisco  Bay  (San 
Francisco,  Alameda,  Contra  Costa,   San  Mateo  and  Uarin)  with  but 
60  per  cent  of  the  land  area  of  Los  Angeles  County  produced  two 
and  one-third  times  as  much  manufactured  goods  as  did  the 
southern  county.      This  is  illustrated  graphically  bel 


-  69  - 


Los  Anrcles  County 
Land  Area 
4115   3q,    miles 
ttf  ~.    Output 
13,009,916 


Five  Bay  Counties 
Land  Area 
2464   sq.   miles 
Mfc.    Output 
$970,728,885 


-    70   - 


POWER  DEVELOPMENT  IH  rKI_  .TAi;  HAG  KEPT  UP  WITH  THE  DEMANDS 

In  no  state  in  the  Union  has  the  use  of  power  grown  to 
such  a  point  as  it  has  in  California. 

Per  capita  use  has  increased  over  100  per  cent  in  the 
last  ten  years. 

Today  the  average  Californian  uses  over  three  times  as 
much  electricity  as  the  average  Easterner. 

Rates  are  the  lowest  on  the  average  of  any  place  in  the 
United  States. 

This  is  oecause  the  power  companies  have  lived  up  to 
their  obligations  in  meeting  the  power  needs  of  the  State. 

There  is  installed  in  all  over  a  million  and  a  half 

horsepower  in  steam  and  hydro  service  in  California.   During 

the  past  twelve  years  the  pov/er  companies  of  California  have 

increased  their  capacities  as  follows: 

Hp.  Installed 

1910  383.510 

1911  447,010 

1912  519,205 

1913  586,452 
191*  663,852 

1915  685,102 

1916  716,013 

1917  778,338 

1918  778.143 

1919  804,443 

1920  901,656 

1921  804,443 

1922  1,280,412 

Plans  are  definitely  under  way  to  add  1,000,000  ad- 
ditional horsepower  in  hydroelectric  and  steam  plants  by  1930» 
This  is  adequate  to  meet  all  demands  based  upon  past  rates  of 
growth.   Should  these  be  exceeded,  plans  will  be  revised. 


-  71  - 


Under  this  support  from  power  companies,  the  State 
of  California  has  exceeded  practically  every  section  of  the 
country  in  population,  growth  and  v.ealth.   During  the  past 
decade  its  rate  of  growth  was  44.1  per  cent,  a  record  exceeded 
only  by  Arizona  and  Montana. 

This  splendid  power  development  is  made  possible  by 
the  encouragement  of  manufacturing  industries  in  the  State  of 
California  to  such  an  extent  that  the  recent  Census  reports 
place  California  eighth  among  all  the  great  states  of  the 
Union  in  the  value  of  her  manufactured  products,  and  fifth  in 
the  number  of  her  industries.   Shall  we  for  one  moment  tempo- 
rize with  any  philosophy  that  will  have  a  tendency  to  check  the 
great  flow  of  privately  invested  capital  that  is  now  seeking  en- 
trance into  this  State? 


-  72  - 


WHAT   AB  ffi   POWER   SHORTAGE    IN   CALIFOPJIIA? 

During  the  period  preceding  June  30,  1920,  there  had 
been  a  temporary  shortage  of  power  in  California  by  reason  of 
three  conditions,  none  of  which  could  have  been  prevented  by 
either  private  or  public  agencies  or  distribution.   These  con- 
ditions were: 

(1)  The  fact  that  during  the  war,  the  war  time  re- 
strictions had  prevented  the  power  companies  from  carrying  for- 
ward their  construction  work  to  anticipate  the  power  demands  of 
the  future,  coupled  with  the  fact  that  the  war  itself  had  cre- 
ated an  unusurl  demand  for  power. 

(2)  Inability,  by  reason  of  war  time  conditions  and 
restrictions,  to  obtain  men  or  machinery  for  big  development 
projects  in  1917  and  1918. 

(3)  The  fact  that  at  that  critical  period  there  were 
three  dry  years  --  1918,  1919  and  1920. 

During  the  war  the  government  refused  to  permit  the 
building  of  new  plants.   There  was  o  rapidly  increasing  demand 
due  to  growth  and  due  to  war  time  needs,  but  no  ability  to  in- 
crease plant  capacity.   Similar  conditions  caused  a  far  more 
serious  and  greater  shortage  at  that  time  in  the  Province  of 
Ontario.   When  the  work  of  catching  up  began  considerable  time 
wa»- ;needed  for  construction,  and  it  was  not  until  1920  that  the 
new  plants  began  to  come  in.   That  was  a  few  months  after  the 
Commission's  report.   Today  the  power  companies  are  fully  de- 
veloped and  are  keeping  pace  with  growth.   They  are  better 
equipped  to  carry  on  development  than  they  ever  have  been.   In 
1921  the  power  companies  added  to  the  installed  capacity  in  the 

-  n  - 


State  a  total  of  3^5  thousand  horsepower.   A  larger  amount  will 
be  added  in  1922.   The  construction  program  of  the  California 
power  companies  calls  for  the  expenditure  of  100  million  dollars 
a  year  for  the  next  ten  years. 

The  Railroad  Commission  also  said  in  the  same  letter 
of  transmittal,  discussing  this  temporary  shortage  of  power: 
"No  other  one  thing  is  of  such  vital  importance  to 
the  growth  of  the  state,  from  the  utility  standpoint,  as 
the  immediate  and  comprehensive  development  of  its  hydro- 
electric resources.   During  the  war  period  development  of 
hydroelectric  plants  and  other  power  projects  remained  at 
a  standstill,  due  to  various  causes.   During  this  same 
period  of  curtailment  of  power  development  there  was  not 
only  a  normal  growth  in  the  demands  for  power  load  upon 
the  utilities'  system  but  actually  a  material  increase  in 
the  requirements  of  consumers.   Combined  with  this  fact, 
and  the  continued  period  of  low  precipitation,  a  very 
difficult  situation  was  created  in  the  electric  utility 
business  due  to  the  resultant  shortage  of  power  supply. 
This  situation  was  quite  successfully  met  by  the  hearty 
cooperation  of  the  utilities  and  consumers  acting  in  uni- 
son with  the  Power  Administrator  of  the  Commission.   Fol- 
lowing the  cessation  of  war  conditions  most  of  the  elec- 
tric utilities  of  the  state  took  active  steps  toward  the 
developing  of  hydroelectric  power  early  in  1919 .   It  is 
believed  that  California,  as  a  result  of  this  activity,  will 
never  again  face  the  serious  situation  created  by  the  1919- 
20  combination  of  extraordinary  demand  with  minimum  supply." 

-  74  - 


And  the  Railroad  Commission  in  the  same  letter  said: 

"We  believe  that  there  is  no  matter  confronting  the 
state  that  more  profoundly  and  intimately  affects  the  fu- 
ture development  n.nd  well-being  of  our  people.   It  is 
urgent  that  steps  be  taken  immediately  whereby  a  complete 
investigation  of  all  hydroelectric  power  possibilities  and 
water  storage  possibilities  for  irrigation  and  other  pur- 
poses, be  made  in  detail  and  such  legislative  action  be 
taken  as  will  give  to  the  Commission  complete  jurisdiction 
to  direct  the  power  developments  in  the  state  so  that  the 
most  good  to  the  public  will  be  had.   The  problem,  put 
simply,  is  this: 

"First,  what  is  the  present  situation  in  California  in 
regard  to  water  and  power  developments  and  needs,  and  how 
is  the  state's  welfare  affected,  not  only  with  reference  to 
the  public  utilities,  but  also  in  reference  to  the  general 
agricultural  and  industrial  development?   Why  is  the  present 
situation  unsatisfactory? 

"Second,  what  can  be  done  and  what  should  be  done  to 
put  to  the  best  use  our  water  and  power  resources,  and  at 
what  approximate  cost?  What  will  the  effect  be  on  the  utili- 
ties and  the  state's  agriculture  and  industries?" 

The  Commission  also  said  in  the  same  letter  of  trans- 
mittal: 

"This  Commission,  in  carrying  out  its  forward-looking 
construction  program,  has,  in  the  past  year,  found  it  neces- 
sary, in  view  of  war-created  abnormalities,  to  meet  demands 
from  the  utilities  for  financial  aid  in  the  shape  of  in- 

-  7S'  - 


creased  rates.   Constantly  increasing  operating  costs 
stripped  many  of  the  utilities  of  all  semblance  of  finan- 
cial profit,  threatened  their  very  existence.   Every 
article  entering  into  the  operation  of  electric  and  gas 
utilities,  electric  and  steam  and  water  carriers,  ware- 
housing and  other  utilities,  leaped  in  price.   Labor 
costs  advanced,  and  like  that  of  commodities  did  not  re- 
main fixed  for  any  appreciable  length  of  time.   Regulation, 
in  our  opinion,  in  the  face  of  these  abnormalities,  stood 
out  as  a  saving  factor.   True,  utilities  rates  advanced, 
but  they  are  under  control,  with  the  result  that  utilities 
today  are  selling  their  product  at  a  price  nearer  to  the 
prices  of  pre-war  days  than  any  other  commodity.   With  in- 
dex numbers  showing  enormous  increases  in  the  prices  of 
foodstuffs  and  materials  of  all  kinds,  the  cost  of  utility 
service  has  been  kept  at  a  point,  we  believe,  well  within 
the  term  reasonable.   Comparisons  3how  that  against  commo- 
dity price  increases  of  100,200,  300  and  5°0  Per  cen,t  over 
the  prices  of  normal  times,  gas  and  electric  utility  rates 
have  advanced  on  an  average  not  more  than  40  per  cent.  There 
have  been  exceptional  cases  where  abnormally  low,  service- 
destroying,  unprofitable  rates  prevailed,  and  the  Commission 
found  it  necessary  to  bring  them  up  to  a  reasonable  standard, 

t  this  percentage  of  increase  was  topped,  but  on  the  whole, 
the  increases  allowed,  in  the  face  of  unregulated  price  fixing 
of  materials,  etc.,  stand  as  fair.   These  higher  rates,  in 
most  cases,  were  designed  not  to  increase  the  companies'  re- 
turn upon  their  investment,  but  solely  to  cover  the  increased 
cost  of  operation," 

-  76  - 


CALIFORNIA'S  IIAGNIJICENT  ATT.      T  IN  HYDRO  ELECTRIC  DEVELOPTE  \ 

In  length  of  transmission,  in  voltages  involved  in  this 
transmission,  in  extent  of  distribution  network,  in  the  overcoming 
of  hazards  through  mountain  gorge,  acros.-  arid  deserts  and  impa-:  - 
able  water  barriers,  the  engineers  of  California  have  outdistanced 
the  world  in  hydroelectric  achievement.  Six  of  these  records  are 
cited  as  instances  of  this  wonderful  acccr-ipla     t. 

prer  j •      -en  of  power  transmission 

lines  in  the  world:      r  ,  Ore  .  Mexican  Border  and  up 

into  Nevad.  .    On  January  1,  1922,  there  was  in  this  interconnec- 
tion over  a  million  horsepov/er  from  hydroelectric  generating  plants 
and  five  hundred  thousand  horsepower  in  steam  generating  plants. 

The  largest  concentrated  block  of  electric  pov;er  ever 
available  for  public  use,  made  possible  by  this  interconnection. 
The  total  annual  electrical  energy  delivered  to  consumers  in  this 
vast  interconnection  is  rapidly  approaching  four  billion  kilowatt 
hours . 

The  highest  £er  capita  use  of  electricity  of  any  commun- 
ity in  the  world:  the  Western  State     In  one  of  the  states  the 
per  capita  consumption  has  reached  the  wonderful  total  of  2000 
kilowatt  hours.   The  average  per  capita  use  in  the  west  is  over 
twice  the  per  capita  use  of  the  nation  as  a  whole. 

The  first  long,  distance  transmission  line:  20  miles  at 
10,000  volts  from  San  Antonio  to  San  Bernardino,  California. 

Longest  high  voltage  transmission:   87.000  and  55.000 
volts,  539  miles,  from  Mono  county,  California,  to  Yuma,  Arizona; 
Southern  Sierras  Power  Company. 

-  77  - 


Highest  voltaic  transmission  ever  attempted  in  the 
world:  Present  record  of  actual  operation,  1^0,000  volts,  240 
miles,  Big  Creek  to  Los  Angelos;  Southern  California  Edison 
Company.   The  Great  Western  Power  Company  has  constructed  and 
will  soon  operate  at  165.COO  volts,  a  200-mile  line  from  its 
Caribou  plant  on  the  Feather  River  to  San  Francisco.   The  Pacific 
Gas  and  Electric  is  now  installing  a  190-mile,  220,000-volt  line 
from  Pit  River  to  the  Bay  District,  which  will  undoubtedly  stand 
a3  a  supreme  accomplishment  for  many  years. 

Proponents  of  the  Water  and  Power  Act  point  with  pride 
to  the  attainments  of  the  Hydro  Electric  Power  Commission  of 
Ontario,  Canada,  and  its  accomplishments.   To  those  familiar 
with  California  attainments  little  is  found  in  this  citation  of 
the  Ontario  situation  to  fire  the  imagination*   The  facts  are 
that  while  from  1910  to  1920  the  Hydro  Electric  Power  Commission 
actually  constructed  and  put  into  oper         thing  under  sixty 
thousand  newly  developed  horsepower,  and  have  programs  laid  out 
for  five  hundred  thousand  additional  horsepower,  those  having  in 
charge  the  interconnected  system  of  California  have  built  and  put 
into  service  over  eight  hundred  thousand  newly  developed  horse- 
power and  have  let  major  contracts  involving  a  million  and  three- 
quarters  horsepower  for  the  next  10-year  period. 


-  78  - 


LNTS   0  .   ACT  CLAIM  WHAT 

wi __  ^_  gjg |  :ats? 

If  we  grant  every  claim  made  for  the  proposed  Act, 

every  assertion  of  capable  management,  or  economical  construc- 
tion and  efficient  operation,  and  assume  that  the  Board  will  be 
able  to  obtain  the  lowest  rate  of  interest  so  far  claimed,  the 
resulting  apparent  saving  will  be  about  as  follows: 
On  each  $100  invested  in  Generating  Plants: 

Annual  interest  $  5.00 

Sinking  fund  requirements  (50-year  annuity)  .48 

On  each  $100  invested  in  Distribution  5.00 

Sinking  fund  requirements  (25-year  annuity)  2.10 

Total  charges  on  $200  $12,58 

Average  rate  6.29# 
Privately  owned  utilities  require,  as  a  margin 
of  safety,  about  1-1/2^  in  excess  of  the  cost 
of  money.  A  publicly  owned  business  may  be  able 

to  get  along  with  less,  say  3/4  of  If?  .75 

Total  rate  of  return  required  7.04;"? 

Maximum  rate  allowed  privately  owned  utilities  8.00 

Saving  .96JC 
Applied  to  a  total  investment  of  $500,000,000 
the  rcffl  1  ARID  annual  saving  would  be  $4,800,000. 

Or,  per  capita  $1.30 

The  above  saving  is  apparent  ind  not  real  as  the  lower 
interest  rate,  if  obtained,  ffould  be  in  a  large  measure  due  to 
the  fact  that  the  State  bonds  will  be  tax  free.  This  simply 
means  the  shifting  of  a  part  of  the  tax  burden  from  one  group 

-  79  - 


of  taxpayers  to  another  group. 

The  above  comparison  is  in  fact  entirely  fallacious 
as  it  assumes  that  the  State  could  build  plants,  transmission 
lines  and  distribution  systems  for  unit  costs  as  low  as  the 
existing  investments  of  the  power  companies,  entirely  ignoring 
the  higher  costs  of  every  item  that  goes  into  such  construction, 
and  that  the  most  economical  power  sites  have  already  been  de- 
veloped. 

Furthermore,  as  the  bonded  debt  of  the  State  goes  up, 
the  interest  rates  will  go  up  as  it  has  done  in  other  places. 
The  State  cannot  expect  to  borrow  $500,000,000  at  the  same 
intBrest  rates  that  it  has  paid  for  less  than  one-fifth  of  this 
amount , 

This  increase  in  interest  rates  will  apply  to  all 
State  bonds  issued  for  any  and  all  public  improvements,  such  as 
highways,  schools,  river  and  harbor  improvements,  etc. 

If,  for  example,  the  bonds  of  the  Y/ater  and  Power  Com- 
mission bear  interest  at  5-1 /2  per  cent,  instead  of  5  per  cent 
as  assumed  above,  the  annual  saving  per  capita  will  be  reduced 
to  less  than  20  cents,  and  if  at  5.6  per  cent  it  rill  vanish 
altogether. 


-  80  - 


how  v/ill  £h2  fin        £  contel'iplatsd  affect 
3 ^____  22  223  stab? 

There  is  a  limit  to  credit  even  of  a  State.   The  more 
the  State  "borrows  the  higher  the  interest  rates  will  be  on  all 
moneys  borrowed  whether  for  water  and  power  developments,  for 
highways,  for  schools  or  any  other  public  improvement. 

At  the  rate  of  growth  of  population  during  the  last 
decade,  by  1950  the  population  of  California  will  be  10,000,000 
persons,  or  three  times  the  present  population,  and  in  all  prob- 
ability this  figure  will  be  reached  before  that  time. 

Many  improvements  such  as  highways,  harbor  and  river 
improvements,  flood  control,  educational  facilities,  etc.  will 
have  to  be  provided  at  public  expense,  and  these  will  require 
extensive  use  of  the  public  credit  for  securing  the  necessary 
funds.   The  State's  borrowing  capacity,  should  therefore  be 
conserved  against  such  needs  and  not  be  absorbed  by  engaging 
in  business  ventures  which  private  enterprise  and  private  capi- 
tal are  willing  to  undertake. 

The  present  bonded  debt  of  the  Stats  is  $76,000,000. 
The  $500,000,000  which  would  be  authorized  by  the  Water  and 
Power  Act  would  increase  it  to  more  than  twice  the  amount  of 
the  present  bonded  debt  of  the  State  of  New  York,  which  has  an 
assessed  value  of  nearly  four  time3  that  of  California. 

The  bonded  debt  of  the  State,  the  Counties  and  the 
Municipalities  of  California  has  increased  in  the  last  ten  years 
as  follows; 


-  81  - 


1911  1921 

State  bonded  debt  5,C77,500       75,124,500 

Counties  bonded  debt  22,655,890      117,197,908 

Municipalities  bonded  debt      35.^73.033 149.611.831 

Total  $93,906,423       42,fi34,239 

Total  per  capita         $39  |96 

Increase  146  per  cent. 

There  is  absolutely  no  doubt  that  the  issuing  of 
$500,000,000  of  State  bonds  would  seriously  affect  the  credit 
of  the  State  and  be  reflected  in  higher  interest  rates. 


-  82  - 


GOVFJ.  -"RES  IN  BJJ       --  CANADIAN  R     YS 

An  unusually  striking  example  of  "Government  in 
Business"  iz   to  be  found  in  the  railway  situation  in  Canada, 
and  is  well  worth  careful  study. 

In  Canada,  transportation  is  supplied  almost  entire- 
ly by  two  great  railway  systems,  one  owned  and  operated  by  the 
government,  the  other  by  private  enterprise.   These  two  systems 
are  suprisingly  similar  in  their  general  outlines.  Both  op- 
ate  nearly  twenty  thousand  miles  of  track,  both  have  a  total 
investment  in  excess  of  a  billion  dollars,  both  extend  from 
the  Atlantic  to  the  Pacific,  both  serve  nearly  every  important 
city  industrial  center  and  seaport  in  Canada,  with  extensions 
to  Chicago  and  connections  with  lines  in  the  United  States.  By 
far  the  greater  part  of  the  mileage  of  each  is  paralleled  by 
the  other.   The  physical  conditions  of  construction,  operation 
and  available  traffic  are,  therefore,  practically  identical. 
It  is  in  the  operating  statements  that  we  find  the 
vast  difference  between  public  and  private  ownership.   For  the 
year  1920,  the  last  year  for  which  statistics  are  available,  a 
comparison  of  the  operations  of  the  government -owned  system 
with  the  Canadian  Pacific  shows  the  following  results; 


-  83  - 


Government 


Private 


Canadian  Northern  Rys 
Canadian  Gov't  Rys. 
Grand  Trunic  Pacific 


Canadian  Pacific 
System 


Miles   operated 

Locomotives 

Passenger  Cars 

Freight  Cars 

Prt.  Hauled-Ton  Miles 

Avg.Rev.  ,per  Ton  Mile 
Passenger  Miles 

Avg.Rev.  ,per  Passenger 
mile 
Total  Cost  of  Property 

Revenues,  1920 
Operating  Expenses 

Net  Earnings 
Bond  and  Other  Inter( 

Surplus  or  Deficit 
Dividends 

Added   to  Surplus 


17.197 
1,954 
1.858 

84,308 
8,827,812,030 


19.306 
2,255 
2,781 

88,057 
13,856.607.551 


$".00966  $  .01038 

925.609.695  1,718,084,609 

$  .0290  $  .0282 

|l , 289 .  413 . 931  $1 . 105 . 388 , 186 


v 

126.387.437 
156.725.394 

227.607.797 

184,898,256 

30,337.957 

1 

42,709.641 

$ 

33.709,209 

9,865.458 

v* 

64,046,166 

$ 

32,844,083 

29.227,277 

64,046,166 


3. 616. 806 


Note:   Interest  due  Canadian  Government  on  advances  amounting  to 

♦233,800,738  not  included  in  above.   This  interest  amount- 
ed to  more  than  $6,000,000. 


-  84  - 


NOhTH  DATOTA  /ND  WHAT  HAPPKNKD 

In  North  Dakota  wheat  is  the  principal  crop.   Some 
years  ago  the  farmers  of  that  state  were  dissatisfied  with  the 
manner  in  which  their  wheat  was  marketed  at  Minneapolis  and  Duluth. 
A  coterie  of  socialists,  organized  under  the  name  of  the  non- 
partisan  league,  capitalized  this  dissatisfaction  politically  and 
promised  to  relieve  the  farmers'  ills  "by  putting  the  state  govern- 
ment in  the  wheat  business  and  incidental  businesses.   They  call- 
ed their  socialistic  program  the  New  Freedom.   In  the  election  of 
1916  the  non-partisan  league  swept  the  state  and  in  January,  1917 • 
its  administration  assumed  control  and  proceeded  to  give  North 
Dakota  an  adult  dose  of  the  New  Freedom.   State  grain  elevators 
and  flour  mills,  a  state  hank,  and  a  state  chain  of  stores  were 
established.   All  these  enterprises  failed  and  the  state  "bank 
caused  the  closing  of  numerous  other  banks  by  suddenly  withdrawing 
deposits  of  state  funds.   Scandals  developed  in  the  relations 
between  sonc  non-partisan  league  officials  and  certain  banks •  A 
very  oppressive  political  organization  was  built  up.   In  four 
years  taxes  trebled.   Yet  prior  to  1917  the  non-partisan  league 
officials  were  quite  positive  in  their  assertion     t  the  pro- 
ved state  enterprises  could  not  fail.   They  were  aa  sure  of 
ovitable  success  as  are  those  .-dvocates  of  the  California  Water 
and  Power  Act  who  tell  U3  that  the  taxpayers  of  Caliicrnia  will 
not  be  called  on  to  pay  any  part  of  the  proposed  500  million 
dollar  bond  issue  for  the  reason  that  the  business  ventures  in 
:ch  the  money  is  to  be  invested  will  pay  for  themselves. 

-  W  - 


In  1921.  after  four  disastrous  years  of  the  New  Freedom, 
the  people  of  North  Dakota  recalled  the  non-partisan  administra- 
tion and  restored  the  state  government  to  sanity. 

Driven  out  of  power  in  North  Dakota,  the  non-partisan 

league  has  lighted  in  California  and  is  now  preparing  to  take 

control  of  this  state.    On  January  14,  1922,  the  California  branch 

was  organized  at  Modesto  by  D.  C.  Dorman,  national  manager  of  the 

league,  and  formerly  prominent  in  the  I.  W.  W. ,  and  Walter  Thomas 

Mills,  who  was  socialist  candidate  for  the  United  States  Senate 

in  California  in  1916,  has  been  placed  in  charge  of  the  California 

organization.   Mr.  Mills,  who  is  recently  from  North  Dakota,  says 

in  his  book  "The  Struggle  for  Existence": 

"Those  who  created  the  private  titles  to  the 
earth  created  those  titles  and  the  owners  con- 
tinue to  hold  them  solely  by  force.   But  as 
force  is  the  3ole  foundation  of  private  titles, 
no  such  title  cun  be  valid  in  the  face  of  a 
stronger  force." 

One  of  the  first  acts  of  the  California  branch  of  the 

non-par tisan  league  has  been  to  adopt  the  proposed  Water  and  Power 

Act  as  "one  of  the  main  provisions  of  our  working  program",  and 

to  urge  members  of  the  non-partisan  league  to  join  the  state 

campaign  connittee  which  is  supporting  the  Water  and  Power  Act. 

In  the  March,  1922,  number  of  its  official  lulletin,  called  "The 

Hundred  Thousand",  and  published  at  Berkeley,  the  greater  part  of 

the  front  page  is  devoted  to  an  argument     ipport  of  the  Water 

and  Power  Act,  from  which  the  following  quotation  is  taken: 

"It  is  difficult  to  understand  how  there  could  be 
any  difference  of  opinion  in  regard  to  the  support 
to  be  given  thi3  Water  and  Power  Act.   A  very 
large  campaign  committee,  rerr     mg  all  portions 
of  the  state,  and  all  the  various  useful  occupations, 
is  being  rapidly  organized. 

-  86  - 


"If  the  2,000  League  members  would  immediately 
send  their  names  to  this  State  Campaign  Committee, 
as  volunteer  members  of  the  Committee,  and  equip 
themselves  with  its  literature,  they  would  not 
only  add  greatly  to  their  effective  strength  as 
League  workers,  but  would  immediately  take  their 
places  in  an  effective  campaign  now  on  for  one  of 
the  main  provisions  of  our  v/orking  grogram. 

"Write  to  the  Campaign  Committee  for  the  California 
Water  and  Power  Act,  offering  to  join  the  Commit- 
ter, and  asking  for  their  literature.   Address 
905  First  National  Bank  Building,  San  Francisco." 


-  87  - 


WHY  IS   IT   IITORTANT   TO  PR3rTERV3  THE   IITITIATI" 

Aim  ssu-icLiAvca  a?  the  pecpls? 

At  no  time  in  hi3tory  have  so  many  and  such  vital 
problems  confronted  the  world  and  demanded  solution.  They 
cover  the  realms  of  finence,  of  industry,  of  commerce,  of 
economics  and  of  civil  government.   Vast  and  densely  popula- 
ted areas  are  suffering  acutely  for  the  common  necessities  and 
comforts  of  existence,  and  at  the  same  time  the  productive  en- 
ergies of  the  world,  capable  of  supplying  them,  are  either 
only  partially  employed  or  idle. 

America  has  grown  great,  strong  and  prosperous  be- 
cause the  inventive  genius,  initiative  and  energy  of  her  citi- 
zens has  been  left  untrammelec?  by  government  direction  and  re- 
straint, because  we  have  had  neither  autocracy  nor  paternalism. 
We  need  have  no  fear  or  autocracy  under  our  political  system, 
but  there  is  a  constant  agitation  and  propaganda  in  favor  of 
measures  that  will  ultimately  lead  to  paternalism. 

The  adoption  of  a  policy  of  national  or  state  partici- 
pation in  purely  business  ventures  must  inevitably  lead  to  the 
stifling  of  the  initiative,  to  the  hampering  of  the  inventive 
genius,  to  the  restriction  of  the  energies  and  the  spirit  of 
self-reliance,  that  have  done  more  than  all  else  to  build  ur> 
American  civilization. 

There  are  many  paternalistic  countries  in  the  world. 
Is  there  anything  in  their  present  condition  or  immediate  future 
prospects  that  we  desire  duplicated  hero?  Canada  took  a  chance 
with  her  government  railway  sycten.  North  Dakota  tried  it. 

Shall  California  profit  by  their  example? 

-  88  - 


S'lAL-  '.      _  ;  _^_       CRE  _L-.  10  BE  JEOPARDIZED? 

Proponents  of  California's  Tv'ater  and  Power  Act  in 
their  official  literature  set  forth  the  following  claim: 

"California's  Water  and  Power  Act  will  not  in  any 
way  jeopardize  State  credit,  as  bond  issues  are  rigidly 
safeguarded  under  the  direction  of  a  special  committee, 
and  issues  will  be  only  to  extent  of  assured  returns." 

This  same  philosophy  and  idle  promise  was  argued  in 
Ontario,  Canada,  where  the  Hydro  Electric  Pov/er  Commission  pre- 
vails,  but  what  today  is  the  result  as  witnessed  in  its  borrow, 
ing  power ,  funded  debt,  and  bank  savings.  The  borrowing  power 
of  the  Province  of  Ontario  stands  out  in  severe  contrast  to 
California's  wonderful  credit  situation  by  comparing  the  inter, 
est  rates  that  prevail  in  the  two  districts  in  the  period  over 
which  the  Hydro  Electric  Po'.ver  Commission  of  Ontario  has  been 
in  operation.  Witness  the  actual  fact  : 


Interest  Rates 


Bonds  of  Province   of 

| Of   State   of 

Ontario 

1910                                     3.90 

3.50 

1911 

4.00 

3.40 

1912 

4.00 

3.40 

1913 

4.40 

3.30 

1914 

4.90 

3.30 

1915 

4.90 

3.40 

1916 

5.00 

3.50 

1917 

5.90 

3.80 

1918 

6.00 

4.20 

1919 

5.60 

4.40 

1920 

6.60 

4.60 

1921 

6.25 

4.50 

• 


-  89  - 


The  savings  of  the  people  are  reflected  in  California^ 
wonderful  growth  in  savings  from  1916  to  1920,  today  totalling 
$858,122,000,  as  compared  v/ith  a  striking  decrease  in  savings 
that  has  been  under  way  in  typical  savings  institutions  in  the 
Province  of  Ontario,  as  folio- 

Savings  De-posits  # 

California  Ontario 


1916  £528,910,000  !      $   13,520,000 

1917  596,325,000  13,633,000 

1918  635,681,000  12,177,000 

1919  702,533,000  11,400,000 

1920  858,122,000  10,730,000 


And  as  a  consequence  of  the  operation  of  the  Hydro 
Electric  Commission  in  Ontario,  Canada,  we  find  the  funded  debt 
of  the  Province  per  capita  is  $40.51  as  compared  with  the  free- 
dom from  debt  which  the  citizen  of  California  enjoys  under  a 
funded  debt  of  $14.67  per  capita.   It  is  no  wonder  then  that 
California  today,  which  twenty  years  ago  was  quite  comparable 
in  assessed  valuation  with  Ontario,  winds  up  this  double  decade 
period  with  an  assessed  valuation  of  $4,555,000,000  as  compared 
with  Ontario's  valuation  of  but  $2,054,000,000,  and  yet  in  area 
the  Province  of  Ontario  is  nearly  twice  that  of  California. 


References: 

Annual  Reports 

Supt.  of  Banks,  California 


-  90  - 


EFFECT  OP  THE  WATER  AND  POWER  ACT  ON  THE  BORROWING  POWER 

OF  THE 
INDIVIDUAL  MANUFACTURER,  MERCHANT,  FARMER  AND  LAND  OWNER 


Up  to  the  present  tine  the  State  of  California  has  3old 
"bonds  to  procure  money  only  for  recognized  governmental  functions, 
such  as  the  building  of  roads  and  public  buildings,  and  develop- 
ment of  harbors.   Taxer  have  increased,  perhaps  unavoidably,  out 
of  all  proportion  to  tilt  increase  in  wealth  and  population.   The 
growing  tax  burden  is  a  serious  menace  to  agriculture  and  industry, 
and  unless  checked  will  retard  the  growth  of  this  state.   Taxes 
are  a  first  charge  on  property  and  industry.   They  go  ahead  of 
interest  due  on  loans  to  banks.   They  go  ahead  of  profits.   The 
difference  between  high  taxes  and  low  taxes  may  mean  the  differ- 
ence between  failure  and  success  in  California's  industrial  com- 
petition with  the  rest  of  the  world. 

The  latest  figures  obtainable  from  the  office  of  the 
State  Controller  show  that  the  already  authorized  indebtedness  of 
the  state,  the  counties,  and  the  cities  of  California  is 
♦386,696,304,  after  deducting  the  redemptions  already  made.  This 
does  not  include  the  indebtedness  of  districts.   Of  that  total 
about  188,458,500  represents  bonds  of  the  State.   The  assessed 
value  of  all  California  property  in  1920  was  approximately  five 
billions  of  dollars.   If  we  add  the  proposed  500  millions  of 
State  bonds  to  the  already  enormous  indebtedness  of  the  State, 
counties  and  cities,  it  will  amount  to  nearly  SEVENTEEN  per  cent 
of  the  assessed  value  of  all  California  property  in  1920.   That 
is  a  mortgage  of  SEVENTEEN  per  cent  on  the  assessed  value  of  all 

-  rl  - 


such  California  property.    It  is  a  mortgage  placed  on  your  proper- 
ty "by  others.   Others,  not  you,  get  the  money  and  have  the  spend- 
ing of  it. 

Property,  agriculture,  and  industry  must  pay  interest  in 
the  form  of  taxes  on  that  huge  mortgage  before  they  pay  any  other 
costs  or  profits.   The  bonded  indebtedness  of  the  state,  the 
counties  and  the  cities  diminishes  the  borrowing  power  of  the 
farmer,  the  manufacturer ,  the  merchant,  and  the  land  owner  because 
the  banks  must  take  into  account,  when  lending  money,  the  prior 
right  of  the  taxing  authorities  to  collect  out  of  the  earnings  of 
farm,  factory,  chop  and  tenement,  the  tax  money  due  them  ahead  of 
everybody  else.   Since  the  banker  lending  on  the  security  of  any 
farm  or  property  must  count  on  the  earnings  of  that  property  to 
meet  principal  and  interest  on  his  loan,  he  is  compelled  to  take 
into  account  the  prior  obligations  which  that  property  must  pay. 
Consequently,  the  more  the  state,  the  county  or  the  city  borrows, 
the  less  the  individual  can  borrow. 


-  92  - 


c ovarii i o:j  versus  rsguiai  opoly 

Rudolph  Spreckels,  v.*ho  is  President  of  the  Universal 
Electric  and  Gas  Company  of  San  Prcncisco  and  the  Executive 
Director  and  TREASURER  of  the  organization  which  is  support- 
ing the  Water  and  Power  Act,  is  one  of  the  authors  of  that 
amazing  proposal.  At  a  recent  meeting  of  the  Commonwealth 
Club  held  in  San  Francisco,  Mr.  Spreckels  said  that  he  stood 
for  competition  in  public  utility  service,  and  that  competic 
ion  under  the  present  Utility  Act  is  absolutely  impossible. 
In  an  article  written  by  Mr.  Spreckels  and  published  October 
22,  1921,  Mr.  Spreckels  correctly  said  that  it  was  the  policy 
of  the  Railroad  Commission,  where  competition  already  existed, 
to  stabilize  and  equalize  rates,  and  otherv/ise  remove  compe- 
tition as  much  as  possible,  except  in  efficiency  of  service, 
and  where  competition  did  not  exist  to  refuse  to  allow  more 
than  one  utility  to  occupy  the  field.  Executive  Director  and 
Treasurer  Spreckels  also  said  in  the  same  article  that  those 
that  place  their  faith  in  regulated  monopoly  will  naturally  op- 
pose the  Water  and  Power  Act.  Mr.  Spreckels  added:  "It  is  my 
absolute  conviction  that  the  attempt  to  regulate  monopoly  is 
an  unqualified  failure. " 

In  other  words,  according  to  the  principal  advocate  of 
the  Water  and  Power  Act,  its  purpose  is  to  re-introduce  com- 
petition in  public  utility  service  to  take  the  place  of  the 
policy  of  regulated  monopoly  now  maintained  by  the  Railroad 
Commission. 

Long  experience  and  observation,  as  well  as  common  sense, 
have  demonstrated  to  the  satisfaction  of  the  Railroad  Commission, 

-  3?  - 


and  to  all  who  have  3tudied  the  situation,  that  competition 
is  in  the  long  run  waste:     d  burdensome.   It  means  ulti- 
mately bankruptcy  for  one  competitor,  leaving  the  other  co.  - 
potitor  victorious  and  supreme  in  the  field  and  free  to  make 
the  rate  paying  public  pay  the  losses  incurred  in  the  rate  war, 
and  in  addition  interest  on  duplicated  and  unnecessary  invest- 
ments. 

The  policy  of  competition,  of  course,  means  doing  away 
with  the  policy  of  regulation,  because  you  cannot  have  regula- 
ted competition  in  rates. 

Years  ago,  for  the  benefit  of  the  public,  the  Railroad 
Commission  adopted  the  policy  of  regulated  monopoly  which  se- 
cures to  the  public  service  at  cost  and  honest  financing.  Upon 
ir  confidence  that  the  State  of  California,  having  adopted 
t  sound  policy,  would  adhere  to  it,  thousands  of  investors 
have  invested  r.illions  of  their  savings  in  the  securities  of 
the  power  co~manies  of  California.  Regulation  they  knew  would 
prevent  their  getting  more  than  an  ordinary  return  on  their  in- 
vestments, but  it  would  also  prevent  the  wasteful  competition 
which  might  cause  the  bankruptcy  of  their  company  and  the  loss 
of  their  capital.   There  are  46  thousand  owners  of  the  stock  of 
California  power  companies  and  probably  an  equal  number  of 
owners  of  the  bonds. 

The  proposed  Water  and  Power  Act,  by  restoring  the  old  cha- 
otic competitive  conditions,  would  imperil  all  investments  in 
California  power  companies.  Its  adoption  bj  the  people  would  be 
a  breach  of  faith  on  the  part  of  the  State  of  California  to  the 
men  and  women  whose  money  has  been  invented  upon  their  confidence 

.  94  - 


that  the  State  of  California  would  maintain  its  policy  of 
regulated  monopoly.   The  Y/ater  and  Power  Act  would  he  as 
immoral  and  dishonest  as  a  repudiation  by  the  State  of  its 
bonded  indebtedness. 


-  95  - 


Prosperity  and  Growth  In  Los  Angeles  not  Attributable  to 
nlcip&Iljr-owned  Power, 

Proponents  of  the  so-called  V/ater  and  Power  Act  continual- 
ly assort  that  the  great  growth  and  prosperity  of  Los  Angeles  is 
due  to  municipal ly-ov/ned  power.   What  are  the  facts? 

1.  The  municipal  power  bureau  of  Los  Angeles  never  at 
any  time  prior  to  May  1,  1922,  supplied  more  than  thirty  per  cent 
of  the  pov/er  service  in  the  city  of  Los  Angeles.   The  balance 

of  the  pov/er  service  in  the  city  prior  to  May  1,  1922  was  sup- 
plied by  the  Los  Angeles  Gas  and  Electric  Company  and  the  Southern 
California  Edison  Company. 

2.  In  order  to  supply  less  than  one-third  the  service, 
the  municipal  pov/er  bureau  of  Los  Angeles  purchased  power  from  the 
Southern  California  Edison  Company.   In  other  words,  a  substantial 
amount  of  the  power  sold  and  distributed  by  the  city  was  not  power 
developed  by  the  city  but  power  developed  by  private  enterprise. 

3.  Since  May  1,  1922,  the  city  of  Los  Angeles  has 
purchased  the  distribution  system  of  the  Edison  Company  and  has 
now  combined  its  own  business  within  the  city  with  that  formerly 
conducted  by  the  Edison  Company  but  the  bulk  of  the  power  generated 
and  distributed  by  the  city  is  supplied  the  city  by  Edison  Company. 
Without  the  achievements  of  private  enterprise,  the  Los  Angeles 
power  bureau  could  not  do  the  business  it  is  now  doing  and  at  date 
is  absolutely  dependent  upon  power  developments  made  by  private 
companies. 

4.  Prosperity  and  growth  in  Los  Angeles  City  are  not  in 
any  way  due  to  municipal  pov/er.   This  is  shown  clearly  by  the 


-  96  . 


records  of  growth  of  the  city  in  population  before  and  since  the 
bringing  in  of  municipal  power.   United  States  census  figures  show 
that  Los  Angeles  City  had  a  population  in  1900  of  102,479,  which  in 
ten  years  increased  by  216,719  making  the  total  in  1910,  319,193, 
an  increase  of  over  200#.   The  increase  for  the  next  decade  1910 
to  1920,  was  257,475,  making  the  total  in  1920,  576,673,  an  inr 
crease  of  about  80#.   Estimates  of  population  by  the  Log  Angeles 
Chamber  of  Commerce,  which  are  not  very  reliable  as  compared  ' 
United  States  census,  but  which  may  be  considered  relatively  reli- 
able, show  that  for  the  five  years  previous  to  1917  the  increase 
in  population  was  256,000  or  80^,  while  for  the  five  years  since 
1916  the  increase  has  been  115,000,  or  20?S. 

5.  On  the  contrary,  the  industrial  growth  in  Southern 
California  has  been  outside  of  the  City  of  Los  Angeles,  especially 
in  the  cities  of  Vernon  and  Torrance,  where  the  regular  power  rched- 
ules  of  Edison  Company  have  been  in  effect.    The  industrial  in- 
crease in  these  places  has  been  enormous,  not  only  in  the  estab- 
lishment of  new  industries  but  also  on  account  of  the  removal  of 
industries  from  Los  Angeles  City  to  escape  the  heavy  burden  of 
taxes  and  restrictions  imposed  upon  them  by  the  City  of  Los  Angeles, 
these  companies  voluntarily  paying  the  higher  rates  for  power, 
which  they  consider  to  be  more  than  offset  by  the  advantages  in 
having  their  establishments  outside  the  City  of  Los  Angeles. 

6,  The  City  of  Los  Angeles  has  an  industrial  schedule 
which  is  a  "below  cost"  schedule  made  at  the  time  and  for  the 
single  purpose  of  inducing  the  Goodyear  Tire  Company  to  loaate 

in  Los  Angeles.   The  City  of  Los  Angeles  bought  power  from  the 
Edison  Company  at  an  average  oost  in  1921  of  1.14£  per  K.W.K. 
Under  this  power  schedule  of  the  City  of  Los  Angeles  power  is 


sold  for  as  little  as  0.96£  per  K.V/.H,  ,  which  is  further  reduced 
by  discounts  for  off-peak  business  and  high-load  factor  business. 
Every  kilowatt  hour  the  city  sells  at  les3  than  the  rate  paid  to 
Edison  Company  is  actually  sold  at  a  loss.   It  is  this  "below 
cost"  schedule  at  the  expense  of  taxpayers  which  proponents  of  the 
Water  and  Power  Act  compare  with  normal  schedules  in  other  local- 
ities. 

But  in  any  discussion  of  the  influence  of  the  municipal 
power  bureau  on  the  growth  of  Los  Angeles,  the  fact  stands  out 
that  Los  Angoles  is  not  the  only  place  in  the  state  which  has 
grown  and  developed.   The  entire  state  has  made  wonderful  pro- 
gress in  the  last  ten  years.   The  commercial  and  industrial 
centres  of  the  northern  part  of  the  state  have  outdistanced  Los 
Angele*  in  growth.   The  only  difference  is  that  these  sections 
in  the  North  have  not  advertised  as  well  or  made  as  much  (loise 
about  their  growth.   These  sections  in  the  North  have  been  sup- 
plied with  power  by  private  companies  and  the  private  companies 
can  claim  just  as  good  results  with  the  communities  they  have 
served  as  Los  Angeles  can  show  in  the  last  ten  years.   See 
census  figures  on  Pages  1  and  2  hereof. 


-  9ft  - 


MUNICIPAL  CWHSrtSHIP  IN  LOS  ANGELES 


So  much  interest  has  been  attracted  to  the  experience 
of  the  City  of  Los  Angeles  in  the  operation  of  its  raunici pally- 
owned  public  utilities,  and  so  many  contradictory  opinions  have 
been  expressed  as  to  the  results  attained,  that  an  analysis  of 
the  records  and  a  concise  statement  of  the  facts  should  be  of 
great  value  to  the  public  at  this  time.   The  City  acquired  its 
water  system  in  February,  1902,  by  purchasing  the  property  of  the 
Los  Angeles  City  Water  Company.   The  Owens  River  Aqueduct  was 
begun  in  1905  and  completed  in  1913 .   Construction  of  a  power 
system  was  authorized  in  1910,  begun  in  1911,  and  the  first  unit 
placed  in  operation  in  1917.   An  option  on  the  city  distribution 
system  of  the  Southern  California  Edison  Company  was  taken  in  1917* 
under  which  the  Company  continued  to  operate  until  early  in  May 
1922,  when  the  City  exercised  its  option  and  took  over  the  prop- 
erty.  Prom  official  reports  published  by  the  City,  the  follow- 
ing facts  have  been  abstracted,  which  give  the  general  results  of 
operation: 

1  -  Investment: 

Bonds  sold  to  provide  funds: 

Water  Works  -  $  42,356,100 

Power 22,351,000 

Municipal  Improvement  Dist.     4,990  ,000 


*  69,697.100 


19.452.383 


1.392.179 


Reinvested  Earnings: 

Water  Department  -  18,204,602 

Power  Department  -  1 ,247,781 

Assessments  on  Property  Owners: 

For  Street  Main  Extensions  -      263,012 
For  Service  Connections   -     1,129,167 

Current  Indebtedness,  Dec.  31,1921 

Water  Department  -  1,655,011 

Power  Department  -  2,351,053 

4,006,064 

Reinvested  Depreciation  Reserve  -_  5.106.829 

Total  Investment   -  -  $99 ,654, 555 

2  -  Total  Interest  and  Sinking  Fund 

Payments  Since  1901  |28, 653.981 

Paid  from  Revenues   of  Utility  Departments        -  4,300,414 

Paid  by  Taxpayers  -  ...         $24,353,567 

-  99  - 


3  -  Bonds  Retired  (almost  entirely  from  tax  funds, 

and  included  in  above)  $   9 » 005,000 

4  -  The  City  reduced  water  rates  1C#  on  taking  over 

the  water  properties,  the  reduction  being 
slightly  more,  in  gross  amount,  than  the  taxes 
formerly  paid  by  the  private  water  company.  Bo 
reduction  was  made  in  electric  rates. 

5  -  The  reinvestment  of  earnings  of  the  two  utility 

departments  was  made  possible  by  requiring  the 
taxpayers  to  pay  85%   of  the  interest  and  sinl'.ir.j 
fund  charges  on  the  investment,  and  if  these  bad 
been  paid  from  utility  revenues,  a  substantial 
increase  in  rate3  would  have  been  necessary,  and 
very  large  additional  bond  ispues  required  to 
finance  extensions. 

The  Southern  Metropolis  has  built  up  a  splendid  property 
and  extensive  business,  and  is  supplying  excellent  service,  at 
rates  not  materially  higher,  when  all  cost3  are  included,  than 
had  been  previously  charged  by  private  enterprise.   They  have 
performed  no  miracles,  and  the  record  shows  that  the  taxpayers 
have  been  required  to  pay  $24,353,567  to  carry  on  the  business. 
The  dollar  has  worked  no  harder,  no  more  effectively,  for  the 
public  than  it  has  for  the  privately-owned  utilities,  and  the 
taxpayer  has  paid  heavily  for  the  sat     tion  of  municipal  owner- 
ship. 


*  100  - 


'IPARISOE  OP  THE  COST  OF  ELECTRIC  SERVICE  IH 
LOS  ANGELES  ATO  5  AN  FRANCISCO 

During  the  fiscal  year  ending  June  30,  1921,  the  City  of 
L03  Angeles  collected  from  the  taxpayers  of  that  City,  to  pay  in- 
terest and  sinking  fund  charges  on  bonds  issued  to  build  and  acquire 
its  water  and  power  enterprises,  the  following  sums: 

For  Water  Bonds  $1,286,117.23 

For  Power  Bonds  1.341.952.50 

Total  $3.125, 069. 73 

The  total  assessed  valuation  of  taxable  property  within  the 

City  was  $704,559,075.,  and  the  income  of  the  City  was  as  follows: 

From  Property  Taxes  $9,843,326.00 
From  all  other  sources  except  bond 

issues  and  utility  revenues  4,202.462.00 

Total  City  Revenues  ftt.  045,7ttti.00 

It  appears,  therefore,  that  the  tax  collections  required  to 
pay  the  annual  charges  on  the  City's  utility  bonds  amounted  to  32^  of 
the  total  tax  burden  of  the  City  property  owners,  and  to  22%  of  the 
total  revenues  of  the  City.  As  the  interest  and  sinking  fund  charges 
on  bonds  are  paid  from  the  property  tax,  it  is  apparent  that  the  fol- 
lowing rate  of  taxation  was  in  effect  during  the  fiscal  year: 

For  water  Bonds 

For  Water  Bonds      $.182  per  $100  of  assessment 

For  Power  3onds       .261  per  $100  of  assessment 

Most  of  the  water  bonds  were  issued  to  provide  funds  to 
build  the  Owens  River  Aqueduct,  and  are,  therefore,  partly  chargeable 
to  the  power  enterprise.   Ignoring  this  fact,  however,  it  is  obvious 
that  the  tax  payments,  as  stated,  are  very  substantial  additions  to 
the  bills  collected  by  the  City  for  electric  service,  and  in  com- 
paring the  cost  of  such  service  in  Los  Angeles  with  the  rates  charged 
by  public  utilities  in  other  Cities,  they  should  be  given  considera- 
tion.  In  addition  to  this  element  of  direct  costs,  the  taxes  paid 

-  101  - 


by  the  privately  owned  power  companies  should  also  be  considered. 
The  City  of  Los  Angeles  pays  no  taxes  on  its  utility  property;  the 
taxes  paid  by  the  owners  before  it  was  acquired  by  the  City  have  been 
distributed  among  other  taxpayers. 

A  specific  comparison  between  the  cost  of  electric  service 
in  Los  Angeles  and  in  San  Francisco,  including  taxes  in  both  cases, 
is  shown  in  the  following  typical  examples  of  actual  consumers: 

1  -  Domestic  Use: 

4  rcom  cottage,  assessed  at  $1,250.,  using  10  kwh  monthly. 

Cocx  of  :').-•<•-.'     i  Lou  Angeles: 

Electric  bill,  c    an,  3.2  nos.  @  $.60        $7.20 
taxes,  for  Power  Bond  Charges,  $1,250  @  .261      ^.26 

Total  direct  payments  $10.46 

Reallocated  Utility  taxes,  1C$  1.05 

Total  Cost  of  Electricity  per  year      $11.51 

Cost  of  same  service  in  San  Francisco: 
Minimum  bill,  12  mos.  @  $.85    $10.20 
Surcharge ,  6%  .61 

Total  Cost  Per  Year  10.81 

2  -  Domestic  Use: 

6  room  cottage,  assessed  at  $3,000,,  using  25  kwh  monthly. 

Cost  of  Service  in  Los  Angeles: 

Electric  bill,  300  k*h.  €  $.056      $l6.S0 
Taxes  for  Power  Bonds  $3,000  ^  .261     7.8^ 

Total  direct  payments         $24.63 
Reallocated  Utility  taxes,  10JC  2.46 

Total  cost  per  year  $27.09 

Cost  of  same  service  in  San  Francisco: 
Ilectric  bill,  300  kwh.  ^  .08  $24.00 
Surcharge,  6£  1.44 

Total  Cost  Per  Year  $25.44 


-  102  - 


3  -  Domestic  Use: 

10  room  dwelling,  assessed  ut  07,000,,  using  80  kwh  monthly: 

Cost  of  Electricity  in  Los  Angeles: 

Electric  bill,  960  kwh  @  $.056  $  53.76 

Taxes  for  Power  Bonds  $7,000  0  .261        lo . 27 

Total  direct  payments  $  72.03 

Reallocated  Taxes,  10$  7.20 

Total  cost  per  Year  $79.23 

Cost  of  sane  service  in  San  Francisco: 

600  kwh  3  ,08                          I  48.00 
36O  kwh  3  .06  Zig60 

69.60 
Surcharge ,  6%  a.]3 

Total  cost  per  Year  173-78 

4  -  Apartment  Hotel,  assessed  at  £106,900,  exclusive  of  furnitu-e, 

using  1000  kwh  power  and  2000  kwh  lighting  monthly  (ActwilConsuwr) 

Post  of  service  in  Los  Angeles: 

Power  12,000  kwh  $398.40 

Light  24,000   "  924,60 

Taxes  for  power  bond  charges 

♦106,900  Q  .261  279.01 

Total  direct  payments  1,602.01 

Reallocated  taxes,  10#  160.20 

Total  Cost  Per  Year  $1,762.21 

Cost  of  same  service  in  San  Francisco: 

Combined  light  and  power  (actual  bill)  1,130.85 

5  -  Merchant,  (tenant)  assessed  at  $20,000  using  1,190  kwh 

light  per  month 

Cost  of  Service  in  Los  Angeles: 

Electricity,  14,280  kwh  $625.56 

Taxes  for  Pov/er  Bond  Charges 

$20,000  3  .261  5?,20 

Total  direct  payments  $677.76 

Reallocated  Taxes  -  10J*  '7.77 

Total  Cost  Per  Year  $7*5.53 

Cost  of  same  service  in  San  Francisco, 

Including  6%   Surcharge  $57*. 7° 


-  103  - 


6  -  Small  Industrial  Plant  using  5,0C0  kwh  monthly  assessed  at  $25000 

Cost  of  Service  in  Los  Angeles: 

Power  bills  for  year  $1,130.40 

Taxes  on  power  bonds  $25,000  Q   .261         65.25 

Total  direct  payments  $1,195.65 

Reallocated  taxes,  10^  119.56 

Total  cost  of  power  per  year  $1,315.21 
Cost  of  same  service  in  San  Francisco: 

Total  bills  for  year  $1,320.00 

7  -  Large  Industrial  Plant,  U3ing  50,000  kwh  monthly,  load 

factor  35#,  assessed  at  $100,000: 
Cost  of  service  in  Los  Angeles: 

Total  power  bills  $6,840.00 

Taxes  on  Power  Bonds  261.00 

Total  direct  payments  $7,101.00 

Reallocated  taxes,  10#  710.10 

Total  Cost  for  Year  $7,811.10 

Cost  of  same  service  in  San  Francisco: 

Total  Power  Bills  for  Year  $8,778.13 

Prom  the  foregoing  it  is  apparent  that,  while  the  rate 
schedules  are  lower  in  Los  Angeles  than  in  San  Francisco,  the  actual 
charges,  including  taxes  paid  to  carry  the  investment,  are  higher  in 
Los  Angeles  for  all  classes  of  lighting  service  and  lower  only  in 
power  service.   As  a  measure  of  the  overall  difference  between  cost 
of  service  in  the  two  cities,  the  following  shows  the  effect  of  ap- 
plying to  Los  Angeles  the  rates  in  effect  in  San  Francisco,  and  com- 
paring the  totals  to  the  total  co3t  of  service  at  the  present  rates. 
plus  the  amount  of  taxes  required  to  pay  fixed  charges  on  the  in- 
vestment, as  stated  by  the  City  Auditor: 

-  |  •••  - 


Coot  of  Power  to  Los  Angeles  at 
San  Francisco  ra^es 

Commercial  Lichtinc  107,978,308  Kwh  6  .0569  $6,143,966 

Commercial  Power  137,678,474  ■  .0215  2,960,087 

Municipal  St.  Lighting      12,084,054  "  .0659  _  796.339 

Total  257.740,836  19.900,392 

Less  Taxes  -  I  990,039 

Net  Cost  of  Electricity  at  S.F.  rates  $8,910,353 

Cost  of  Power  to  Los  Angeles: 

Total  Bills  for  Power  and  Lighting  $8,186,577 
Taxes  paid  for  Power  Bonds  1,841,952 

Total  Cost  of  Power,  under 

Los  Angeles  rates  10.028,529 

Annual  saving,  at  San  Francisco  rates  $1,118,176 

To  reverse  the  picture  the  following  indicates  the  effect  on  the 

total  cost  of  electric  power  in  San  Francisco  that  would  follow  the 

adoption  of  the  Los  Angeles  policy: 

Cost  of  Power  to  San  Francisco  at  Los  Angeles  rates: 

Commercial  Lighting        82,497,411  Kwh  0  .0494  £4, 075,172 

,8r 


Commercial  Power  126,206,409  "  .0169   2,132, 

Municipal  Lighting  5,215,468  ■  .0437     227,916 

Universal  E  &  G  Sales  30,104,991  ■  .031o(Av)  957.319 

Totals  244,024,279  .O31B  $7,393,515 

Add.  taxes  to  pay  fixed  charges  on  investment 

assessed  Valuation  $?94, 084,308  @  .261  2,072.560 

Total  Cost  of  Power  $9,466,075 

lual  Cost  in  San  Francisco  at  present 

rates,  revenues  of  all  Companies  $8,461,737 
Deduct,  3tate,  Federal  and  Franchise 

taxes  -  10%  846,174 

Net  Cost  of  Power,  Comparable  to 

Los  Angeles  7.615.561 

Annual  increased  cost  at  Los  Angeles  rates  $1,850,512 

It  does  not  necessarily  follow  that  the  citizen  of  Los  Angeles 
with  apparently  lower  rates,  is  able  to  purchase  power  cheaper  than 
his  neighbors,  but  rather  that  he  seemingly  prefers  to  pay  a  very 

-  LOS  - 


considerable  portion  of  his  power  bill  to  the  tax  collector.  When 
the  two  bills  are  added  together,  the  total  cost  appears  to  be 
substantially  hi     than  the  cost  of  service  under  private  owner- 
ship. 

There  is  a  very  ingenious  element  of  psycology  indicated 
in  this  comparison,   Light  bills  are  paid  monthly,  taxes  twice  a 
year.   There  are,  consequently,  twelve  impressions  of  lower  costs 
to  two  of  higher  rates  involved  in  the  application  of  the  Los 
Angeles  policy,  and  the  cumulative  weight  of  these  impressions  is 
calculated  to  keep  the  citizen,  who  is  both  taxpayer  and  power 
user,  content.    It  may  also  be  true  that  the  City  of  Los  Angeles, 
through  the  exemption  of  municipally  owned  utilities  from  the 
payment  of  taxes,  is  evading  a  part  of  the  cost  of  government  paid 
by  patrons  of  privately  owned  utilities. 

The  Los  Angeles  policy  contemplates  the  payment  of  the 
bonds  issued  to  finance  its  power  enterprise  through  sinking  funds 
created  from  money  raised  through  taxes  on  property.   The  tax- 
payers are  assured  that  a  gradual  reduction  in  the  annual  tax 
burden  will  follow  the  payment  of  these  bonds.   This  statement 
should  be  very  carefully  analyzed  by  a  community  contemplating 
following  the  example  of  the  Southern  city,  and  the  following  is 
suggested  as  a  general  statement  of  the  conditions  that  will  exist 
in  Los  Angeles  when  the  power  bonds  are  finally  p»id  off: 

Total  taxes  paid  to  June  30,  1921,  account 

power  bond3  I5;385»4°* 

Bonds  to  be  paid  from  future  tax  levies: 

Outstanding.  June  30,  1921  7,351,000 

Issued,  1922  H.  TOO,  000 

Total  $26,236,404 

Tax  Assessment,  1704,599,078 

Ratio  to  Assessment  3.72JC 

-  106  - 


This  means  that  the  owner  of  a  6  room  cottage,  assessed 
at  $3i°00.  will  be  required  to  make  MB  investment  of  $111.60  in  the 
City's  power  enterprise,  and  that  his  annual  sacrifice  of  interest, 
will,  at  8#  be  .58.93  which  he  should  add  to  h^s  bill  for  electricity. 
If  he  uses  300  Kilowatt  hours  annually  and  the  present  rate  of  5*6 
cents  per  Kwh»  continues,  his  total  annual  bill  will  be  $25.73  or 
8,58  cents  per  Kilowatthour. 

It  should  be  bornein  mind  that  the  cost  of  electricity 
will  not  be  reduced  by  paying  off  these  bonds  from  tax  funds,  but 
rather,  that  a  very  substantial  element  of  cost  will  be  transferred 
permanently  to  the  individual  texpayer  for  the  benefit  of  the  user 
of  electric  service  who  i3  not  a  taxpayer. 

The  Citizens  of  Los  Angeles  are  paying  more  for  power  ser- 
vice, and  more  for  water  service,  than  they  were  when  these  services 
were  supplied  by  private  enterprise.   In  addition,  they  have  al- 
ready paid  $24,353,567  in  the  form  of  taxes,  and  will  be  required  to 
pay  $46,849,800  bonds  as  they  mature,  and  most  of  the  annual  in- 
terest in  addition,  from  future  taxes.   As  the  interest  charges 
on  these  bonds  will  necessarily  exceed  the  principal,  the  Los 
Angeles  taxpayer  is  confronted  with  a  tax  burden  of  more  than 
♦90,000,000  during  the  next  thirty  years  on  account  of  the  city's 
public  utility  ventures,  in  addition  to  the  ordinary  cost  of  munici- 
pal government,  and  his  rates  are  higher  than  they  were  under  pri- 
vate ownership. 


-  107  - 


WHAT  AUTHORITY  HAS  TKS  COMMITTEE? 

Clyde  L.  Seavey,  City  Manager  of  Sacramento  is  one  of 

the  authors  and  principal  supporters  of  the  water  and  power  act. 

The  act  provides  that  the  five  hundred  million  dollars  of  bonds 

SHALL  he  issued  and  sold  by  the  committee  consisting  of  the 

Governor,  Controller,  Treasurer,  Chairman  of  the  Board  of  Control 

and  Chairman  of  the  Water  and  Power  Board,  as  provided  in  said 

Act,  and  the  provision  made  in  the  act  for  the  sale  of  the  bonds 

jc-  7)  is: 

"Except  as  otherwise  provided  in  this  article,  the 
committee  shall  issue  and  sell  bonds  only  upon  the 
written  requisition  of  the  board  stating  the  amount 
of  money  required  and  the  purpose  for  which  it  is 
to  be  used  and  accompanied  by  a  duly  authorized 
certificate  of  the  board  describing  the  property 
or  rights  to  be  acquired  or  the  project  proposed, 
and  stating  the  estimated  cost  thereof  and  showing 
the  same  to  have  been  investigated  and  approved 
and,  in  the  case  of  a  project,  that  plans  r.nd  est- 
imates therefor,  a  copy  of  which  shall  be  annexed 
to  such  certificate,  have  been  prepared  and  adopt- 
ed by  the  board  and  further  certifying  that,  in 
the  opinion  of  the  board,  the  revenue  from  the  prop- 
erty or  rights  to  be  acquired  or  from  the  proposed 
project,  together  with  available  revenues  from 
other  projects,  will  be  sufficient  to  pay  within 
fifty  years  in  addition  to  other  necessary  expenses, 
the  principal  and  interest  of  the  bonds  requested 
to  be  issued." 

In  other  words  the  Act  contemplates  that  the  committee, 
as  distinguished  from  the  Board,  shall  have  no  discretion  but  to 
issue  the  bonds  when  the  Board  complies  vith  the  requirements  of 
Section  7. 

Mr.  Cer.vcy,  in  i.  icIo  published  in  the  Daily  Ht 

of  April  22,  1922,  makes  the  arsurtion  that  - 

-  l 


"It  is  thus  definitely  provided  that  every  essential 
detail  of  any  undertaking  proposed  "by  the  Water  and 
Power  Board  must  be  placed  before  the  Governor,  the 
Treasurer,  the  Controller,  and  the  Chairman  of  the 
Board  of  Control." 

"The  portion  of  Section  7  quoted",  he  says,  "makes 
the  merits  of  a  project  an  essential  part  of  the  com- 
mittee's consideration." 

"The  question  of  whether  or  not  any  project  would  be 
feasible,  whether  a  thorough  investigation  had  been 
made,  and  whether  it  would  pay  out  in  fifty  years 
without  taxation,  are  clearly  embodied  in  Section  7. 
and  the  soundness  as  to  each  of  these  details  must 
run  the  gauntlet  of   the  official  judgment  of  the 
five  members  of  the  committee." 

A  perusal  of  the  whole  Act  and  particularly  of  Section 
7  makes  very  plain  the  fact  that  the  committee  has  no  authority  to 
pass  judgment  upon  the  actions  of  the  Board  in  respect  to  the 
matters  set  forth  in  Section  7.   When  the  Board  files  the  docu- 
ments specified  in  Section  7  the  committee  MUST  issue  the  bonds. 

Mr.  Seavey  suggests  that 

"With  all  details  definitely  before  the  Committee, 
the  committee  would  be  in  a  position  to  prevent 
the  carrying  out  of  an  unwise  project  or  any  un- 
wise or  corrupt  expenditure  of  the  State's  funds. 
It  could  refuse  to  issue  the  bonds.   The  Water 
and  Power  Board,  if  it  persisted  in  carrying  out 
a  questionable  undertaking  would  then  he  compelled 
to  resort  to  Mandamus  Proceedings  in  an  attempt  to 
force  the  committee  to  issue  the  bonds,  and  from 
any  question  of  the  final  outcome  of  any  proceed- 
ings, no  one  can  believe  that  the  members  of  the 
Water  and  Power  Board,  planning  a  betrayal  of  the 
peoples'  interests,  would  bring  Court  proceedings 
against  the  Governor,  who  had  appointed  them,  and 
against  the  Treasurer,  Controller  and  Chairman  of 
the  State  Bor.rd  of  Control.   The  whole  question 
would  be  immediately  thrown  into  the  Courts,  sub- 
ject to  wide  spread  publicity,  and  with  all  re- 
cords and  documents  open  to  the  investigation  of 
any  citizen  of  California,  as  provided  in  the  Act." 

If  the  committee  should  refuse  to  issue  the  bonds  when 
the  Board  has  complied  with  Section  7,  the  conmittee  would  be 
violating  the  duty  imposed  on  it  by  the  constitutional  amendment. 

-  109  - 


In  other  words,  in  order  to  show  that  there  is  some  check  on  the 

power  of  the  Board,  it  is  urged  that  the  committee  might  violate 

duty  and  exceed  its  powers  by  refusing  to  issue  bonds.   The 

tax  payers  of  California  are  in  a  bad  situation  if  they  mu3t  rely 
for  protection  upon  the  assumption  th^.t  officials  will  refuse  to 
perform  their  constitutional  duty. 

The  question,  however,  is  more  or  less  academic  because 
the  Governor,  who  appoints,  and  presumably  will  control,  through 
political  influence,  the  Water  and  Power  Board,  is  one  member  of 
the  committee  and  another  member  of  the  committee  is  the  chairman 

of  the  Water  and  Power  Board.    The  committee  by  the  way,  serves 
without  compensation. 

Before  the  constitutional  amendment  of   


established  the  Board  of  Control  of  which  Ur. 


Seavey  was  formerly  a  member,  there  was  another  Board  of  Control 
consisting  of  

No  one  icnows  better  than  Mr.  Seavey  that  the  old  Board 
of  Control,  serving  without  compensation  and  consisting  of  officers 
who  had  other  duties  to  perform,  did  not  function  as  a  Board  of 
Control  and  exercised  little  or  no  check  upon  the  expenditures. 
It  was  because  the  old  Board  of  Control  made  up  much  in  the  same 
manner  in  which  the  Committee  is  composed,  under  the  Water  and 
Power  Act,  did  not  function,  that  the  present  State  Eoard  of  Con- 
trol, of  which  Ur.  Seavey  was  formerly  a  member,  wa3  ere.  ted. 

The  committee  will  be  nothing  but  a  rubber  stamp  for  the 
Water  and  Power  Board. 


-  110  - 


CALIFORNIA'S  PRESENT  Vrtt.lO   ELECTRIC  ACHIEVEMENTS 
RSCO.:     )  THE  Y/CRLD  OVER 

No  more  eminent  authority  is  o.ualified  to  pass  upon 
the  record  "breaking  achievements  of  California  engineers  in 
the  design,  installation,  and  operation  of  hydroelectric  de- 
velopment than  is  Herbert  Hoover.   In  recent  months  a  super- 
power durvey  for  the  Atlantic  Coast  states  v/as  undertaken 
under  the  direction  of  Congress,  and  in  speaking  of  this  pro- 
posed work  in  the  eastern  cities  Secretary  Hoover  called  at- 
tention to  the  great  outstanding  accomplishments  of  California 
in  no  uncertain  terms,  as  fellow: • 

"At  the  present  time  California  companies  are  carry- 
ing current  over  wires  300  miles  long,  while  the  greatest 
distance  contemplated  in  the  Atlantic  project  is  only  200 
miles.   Furthermore,  all  of  the  great  California  power 
companies  are  'hooked  up'  so  that  continuous  service  — 
something  almost  unheard  of  in  the  East  —  is  practically 
assured  in  California.   And  that  feature,  together  with 
economy,  makes  up  the  underlying  object  of  a  superpower 
project.  Nowhere  is  power  so  cheap  as  in  California. " 

The  foregoing   is  a  quotation  from  a  report  prepared 
by  Secretary  of  Commerce  Herbert  Hoover  for  submission  to 
President  Harding  regarding  a  proposed  superpower  project 
in  the  East. 


-  Ill  - 


THE  J      AND  POWER  ACT  CONTSik-.  . .. fiOJ  GOVERNMENT 

IIBRSHIP  BUT  G_      --SNT  IN  BUSINESS 

Government  ownership  of  natural  resources  is  quite  a 
different  thing  from  government  in  business.   Power  is  not  a 
natural  resource.   Like  wheat  it  is  a  product  of  labor.   Every 
argument  in  support  of  a  proposal  to  put  the  government  into 
the  business  of  making  hydroelectric  power  in  order  to  conserve 
our  natural  resources  would  be  equally  valid  to  support  a  pro- 
posal that  the  State  go  into  the  business  of  raising  wheat  or 
into  the  fisheries.   True,  one  cannot  produce  hydroelectric 
power  without  using  water  which  i3  a  natural  resource,  but 
neither  can  one  raise  wheat  without  using  land  which  is  also  a 
natural  resource,  and  one  cannot  catch  fish  without  using  the 
rivers,  the  lakes  or  the  sea  v/hich  are  also  natural  resources. 

Conservation  of  our  natural  resources  means  that  our 
public  domain,  including  land,  water,  trees,  fuels  and  metals, 
should  not  be  wasted,  but  should  be  used  economically  and  sci- 
entifically in  the  public  interest  and  for  the  public  service. 
But  the  doctrine  of  conservation  does  not  imply  that  the  natural 
resources  should  be  utilized  through  governmental  agencies.   It 
implies  tonly  that  they  should  be  utilized  under  such  governmental 
supervision  as  the  Railroad  Commission  and  the  Water  Commission 
provide  in  California  for  the  protection  of  the  public  interest, 
and  such  supervision  as  the  Federal  Water  Power  Commission  pro- 
vides when  federal  property  is  being  utilized. 

Producing  and  serving  power  is  a  highly  intricate  busi- 
ness, quite  beyond  the  recognized  functions  of  government.   It  is 
not  free  from  financial  hazard.   It  has  been  developed  in  Cali- 
fornia by  private  initiative  and  enterprise  to  a  degree  which  has 
made  California  the  loader  of  the  world  in  the  hydroelectric 

huni  riARft- 


ABOUT  THE  SO-CALLED  MU  _T  OF  ALAMEDA? 

The  outstanding  fact  about  the  Alameda  Municipal  Plant 
is  that  it  produces  no  elacti ic  energy.   It  is  a  mere  distribut- 
ing agency,  and  buys  its  pcver  at  wholesale  rates  from  the  Great 
Western  Power  Company,  and  retails  it  to  residents  of  the  City  of 
Alameda.   Formerly  it  generated  power  by  steam.  When  the  price 
of  oil  went  up  the  steam  plant  had  to  be  3hut  down  and  the  City 
could  not  have  produced  power  at  rates  which  consumers  would 
have  been  willing  to  pay.   If  the  municipal  plant  had  not  then 
been  able  to  buy  eleotric  energy  from  a  private  corporation  it 
would  have  been  compelled  to  shut  down.   The  municipal  plant  buys 
energy  from  the  Great  Western  Power  Company  on  a  sliding  scale, 
the  price  going  down  as  the  quantity  used  increases.   In  1921 
it  paid  for  current,  so  purchased,  at  the  average  rate  of  1.144 
cents  per  kilowatt  hour.   It  sold  that  energy  at  an  average 
price  of  4.67  cents  per  kilowatt  hour.   It  charged  for  commercial, 
residence  and  private  lighting  6.42  cents  per  kilowatt  hour,  for 
power  3,08  cents  per  kilowatt  hour,  and  for  city  lighting  2.25 
cents  per  kilowatt  hour.   There  are  many  communities  in  Califor- 
nia, served  by  private  companies,  that  pay  lower  rates.   In 
Sacramento,  for  example,  the  average  rate  is  3.49  and  the  li, 
rate  is  6,37.   In  San  Jose  the  average  rate  is  3.41  cents  per 
kilowatt  hour.   In  Oakland  the  average  rate  per  kilowatt  hour  is 
2,04  cents,  although  the  light  rate  is  6.63.   In  San  Francisco, 
the  average  rate  is  2.48  and  the  light  rate  5.74  cents. 

The  foregoing   rates  of  private  companies  include  taxes, 
both  state  and  federal,  which  are  11  per  cent  of  the  rate.   The 
Alameda  plant  charges,  as  an  expense,  but  does  not  pay  taxe3$ 

-  112  - 


but  it  charges  taxes  not  on  the  basis  on  which  they  are  paid 
by  private  companies,  but  as  estimated  by  the  City  at  the  City 
rate  on  a  60  per  cent  valuation.   In  1921  the  City  charged 
against  its  expenses,  taxes  to  the  amount  of  $5,664.   If  it 
had  been  a  private  company  it  would  have  had  to  pay  actually 
$18,447. 


-  114  - 


AJ  ABOUT  TliE  SO-CALLED  MUNICIPAL  POWER  PLANT  OF  RIVERSIDE? 

We  are  told  in  the  extensive  propaganda  put  out  by 
the  organization  supporting  the  vater  and  power  Act  that  the 
State  of  California  should  go  into  the  pov/er  business  because 
the  City  of  Riverside  has  made  a  success  of  that  business. 

Riverside,  like  Alameda,  is  a  mere  middleman  in  the 
power  business.   It  buys  all  its  power  from  a  private  company 
at  a  low  rate.   The  City  of  Riverside  secures  its  entire  ser- 
vice at  one  point  at  a  rate  averaging  between  1. 07  cents  and 
1.2  cents  per  kilowatt  hour.   it  secures  power  at  wholesale  at 
less  than  cost.   It  has  secured  advances  for  line  construction 
made  by  consumers  which  it  has  never  refunded.   It  does  not  pay 
taxes.   Like  many  municipalities  operating  such  services,  it 
has  followed  erroneous  bookkeeping  methods.   For  the  fiscal 
year  1919-20  the  Riverside  Municipal  plant's  books  show  a  net 
surplus  of  $64,857.31  on  an  investment  of  $686, 7J6. 85,  or  9.44 
per  cent,  but  if  taxes  and  a  depreciation  at  a  rate  of  3  per 
cent  on  the  fixed  capital  were  charged  against  this  profit,  as 
they  should  be,  the  profit  would  be  reduced  to  $29,194-.  38,  or 
4.25  per  cent  on  the  investment.   This  is  not  an  extraordinary 
showing. 

The  average  rate  per  kilowatt  hour  charged  by  the 
municipal  plant  at  Riverside  is  3. 05  cents,  and  is  a  fairly  low 
rate,  though  not  so  low  as  the  average  rate  of  private  companies 
in  many  cities  of  California,  and  it  must  be  remembered  that  this 
rate  does  not  include  taxes.   The  average  rate  in  San  Jose,  in- 
cluding taxes,  is  3.34  cents,  and  if  we  take  off  the  taxes,  it 

-  us  - 


is  2.98  cents.   The  average  rate  in  Sacramento,  including  taxes, 
is  3«  24  cents,  and  if  we  take  off  the  taxes,  it  is  2.69  cents. 

Riverside,  like  Alameda,  has  a  simple  commercial 
problem  serving  easy  terri+ory.   It  is  not  badly  managed,  cut 
certainly  it  ij  not  better  managed  than  most  private  companies. 
Like  the  case  of  Alameda  it  proves  nothing  with  respect  to  the 
Water  and  Power  Act. 


-  116  - 


OF  _^_  AWGELSS? 

Los  Angeles  has,  by  the  expenditure  of  large  amounts 
of  money  procured  by  bond  issues,  developed  a  municipal  water 
supply  which  it  brings  from  the  Owens  River,  a  distance  of  220 
miles.     ile  primarily  it  iu  a  water  project  the  water  is  used 
to  develop  power  as  a  by-product  and  the  .Municipal  power  Bureau 
sells  power  in  Los  Angeles.   it  supplies  about  one-third  of  the 
power  used  in  Los  Angeles.   The  balance  is  supplied  by  two  pri- 

".e  companies.   There  is  no  denying  that  gross  under-estimates 
of  initial  cost  of  developing  municipal  power  were  given  to  the 
taxpayers  and  vo'ters  of  Los  Angeles  when  they  approved  the  bonds. 
They  were  told  in  1912  that  120,000  horsepower  would  be  devel- 
oped along  the  aqueduct  at  a  total  expense  of  $7,200,000.   The 
annual  report  of  the  Municipal  Power  bureau  on  June  30,1921, 
showed  the  investment  of  $10,700,000  with  only  72,000  horsepower 
developed. 

The  municipal  power  Bureau  claims  a  total  profit  of 

,018,985  <kn  its  power  business.   Mr.  W.  A.  Mushet,  chairman 
of  the  Finance  Committee  of  the       oumission,  Los  Angeles, 
who  in  private  life  is  a  certified  public  accountant,  has  is- 
sued a  statement  in  which  he  sets  out  that  the  Municipal  Light 
and  Power  system  of  Los  Angeles  actually  sustained  a  deficit 
of  $4,571,000  as  compared  with  the  requirements  for  interest 
and  sin.ting  funds  on  outstanding  municipal  bonds  applicable  to 
power  development  and  distribution.  Messrs.  Price ,  Waterhouse 
&  Company,  certified  public  accountants,  were  employed  by  the 
Municipal  Bureau  to  audit  their  accounts,  and  price,  7aterhouse 

-  117  - 


&  Company's  report  shows  a  profit  from  June  30,  1913  to  the  end 
of  1921  of  $824,726.37.  e  fundamental  difference  between  the 
results  shown  by  these  two  certified  public  accountants,  lix. 

net,  on  the  one  hand,  and  price,  '/aterhouse  L   Company  on  the 
other,  is  not  in  the  r.ri  time  tic  but  in  the  theory  on  which  the 
power  project  of  Los  *ngeles  is  capitalized.    :.  :ushet'8  prin- 
cipal contention  was  that  the  power  department  should  pay  a  pro- 
portion of  the  cost  of  bringing  the  water  some  220  miles  through 
the  general  aqueduct  system  since  the  water  is  also  used  for 
power  development.     ice,  "'aterhouse  &  Company  have  disregarded 
this  contention  on  the  ground  that  the  water  was  needed  anyway 
and  power  is  simply  a  by-product.   This  contention  is  unsound 
from  an  engineering  standpoint.   it  makes  the  water  service 
stand  part  of  the  cost  of  the  pov/er  service. 

Mr.  Mulholland  recently  has  stated  in  the  newspapers 
that  he  must  ha/e  $5i000,000  in  bonds  for  water  improvements,  or 
water  rates  must  be  increased.   if  the  J'ater  Department  had  been 
receiving  proper  compensation  for  the  use  of  water  for  power 
purposes,  neither  the  bonds  nor  rate  increase  would  be  necessary. 
This  controversy  8how3  how  difficult  it  is  to  make  fair  conpari- 
sons  of  public  utility  services  operated  by  municipalities, 
municipality  can  pay  out  of  general  funds  without  charging  a- 
gainst  the  service  various  capitalized  expenditures  or  operating 
expenses  which  a  private  company  would  have  to  charge  against 
the  service.         aterhouse  &  Company  in  their  report  make 
the  following  pertinent  criticisms  of  the  municipal  power  proj- 
ect: 

-  118  - 


"We  would,  however,  call  your  attention  to  the  large 
proportion  of  the  general  expenses  for  the  years  1920  and 
1921  charged  to  construction.   While  there  may  be  substan- 
tial arguments  for  the  treatment  adopted,  a  revicv  of  the 
expenditures  in  question  does  not  lead  us  to  believe  that 
such  expenditures  would  have  been  materially  less  had  no 
construction  work  been  in  progress.   Consequently,  we  can- 
not consider  the  pc^cy  adopted  as  conservative  or  entire- 
ly sound.  " 

In  other  words,  the  power  Bureau  has  been  capitalizing 
operating  expenses  in  order  to  show  a  larger  profit.   This  is 
reverse  English  on  what  the  Utilities  used  to  do  in  the  old  days 
before  the  present  system  of  regulation,  when  they  charged  capi- 
tal costs  as  operating  expenses  in  order  to  get  a  higher  rate. 
One  trick  is  as  bad  as  the  other. 

The  supporters  of  the  Los  Angeles  municipal  power  ser- 
vice argue  that  the  complete  justification  of  the  service  is  in 
the  fact  that  its  rates  are  low.   The  average  rate  per  kilowatt 
hour  collected  by  the  City  of  Los  Angeles  power  Bureau  is  2.05 
cents  as  against  an  average  rate  of  3«  09  cents  collected  by  the 
Southern  California  L'dison  Company,  and  an  average  rate  of  4.  18 
cents  collected  by  the  Los  Angeles  Gas  &  Electric  Company.   But 
the  average  commercial  power  rate  of  the  lauiicipal  Power  Bureau 
is  I.30  cents,  while  that  of  the  Edison  Company  is  1.68  cents 
and  that  of  the  Los  Angeles  Gas  &  Electric  Company  is  1.  37  cents. 
But  when  we  come  to  lighting  rates  we  find  that  the  rower  Bureau 
charges  5.73  oents  for  light  as  against  4.79  cents  collected  by 

-  lio  - 


the  Southern  California  Edison  Company,  and  5. 12  cents  collected 
by  the  Los  Angeles  Gas  &  Electric  Company.   To  equalize  and  make 
comparable  these  rates,  it  is  necessary  to  deduct  from  each  of 
the  rates  of  the  private  companies  11  per  cent,  representing  the 
state  and  federal  taxes  which  they  pay  and  which  the  Municipal 
bureau  does  not  pay.   "ith  taxes  added  the  Municipal  Bureau's 
average  rate  would  be  2.27,  its  power  rate  would  be  1.45,  and 
its  light  rate  6.36  cents,   a  large  part  of  the  Municipal  power 
Bureau's  sales  of  commercial  power  is  made  up  of  sales  to  the 
City  of  Pasadena  and  sales  to  the  Goodyear  Rubber  Company  at 
very  low  rates.   These  rates  are  made  possible  only  by  exclud- 
ing from  the  capital  investment  of  the  Power  Bureau  all  contri- 
butions to  the  cost  of  the  aqueduct.   Since  the  inception  of 
the  municipal  power  system  in  Los  Angeles  the  taxpayers  have 
been  called  on  to  pay  $5,385,000  on  account  of  annual  interest 
and  sinking  fund  payments  accruing  on  municipal  power  bonds, 
while  the  Municipal  power  3ureau  has  contributed  from  its  earn- 
ings only  the  small  remainder  of  $605,000  during  a  period  of 
more  than  five  years.   That  is  the  explanation  of  how  the 
Municipal  power  Bureau  is  able  to  sell  power  for  industry  at 
lower  rates  than  the  private  companies  charge.      lo*s  i3 
made  up  first  by  its  light  customers,  second  by  ihe  taxpayers 
who  pay  the  taxes  that  the  Power  Bureau  does  not  pay,  and  third 
again  by  the  taxpayers  who  have  been  required  to  pay  enormous 
amounts  of  interest  and  principal  that  should  have  been  paid 
out  of  the  earnings  of  the  Municipal  power  liureau.   A  forceful 
example  of  the  way  the  Loe  Angeles  power  Bureau  operates  is  In 
the  sale  of  power  to  the  Goodyear  Rubber  Company.   They  sell 

-  L2<  - 


this  power  to  the  Rubber  Company  at  0.82  cents  per  kilowatt  hour, 
and  yet  they  purchase  thousands  upon  thousands  of  dollars  worth 
of  power  from  the  Southern  California  Edison  Company  at  an  av- 
erage of  1.14  cents  per  kilowatt  hour.   TVe  do  not  object  to 
the  City  of  Los  Angeles  subsidizing  industry  if  it  so  desires. 
It  is  not  fair,  however,  to  make  comparisons  of  power  service 
with  private  companies  when  the  city  authorities  pursue  this 
policy. 


-  1.   - 


■ALIFGfittlA  IMITATE  THE  BUREAUCRATIC 
QC  £S  OF  EUROPE? 

Some  supporters  of  the  "Vater  and  Power  Act  tell  us 
that  Euro~>?an  governments  have  gone  further  in  the  direction 
of  public  ownership  and  government  in  business  than  our  country 
has  done.   These  gentlemen  would  have  us  pattern  ourselves  upon 
the  paternalistic  and  bureaucratic  governments  of  the  old  world 
in  the  name  of  efficiency.   One  who  has  had  experience  with  the 
government  public  services  in  European  countries  will  hardly 
content  that  on  the  whole  they  compare  in  efficiency  with  pub- 
lic utility  services  of  the  sane  class  rendered  by  private  cor- 
porations under  public  regulation  in  America.   But  even  though 
European  bureaucracies  could  point  to  superior  efficiency  in 
service,  efficiency  is  not  the  sole  thing  to  be  desired  in  gov- 
ernment.  The  freedom  of  the  individual  is  also  a  consideration. 
Benevolent  despotism  may  be  the  most  efficient  form  of  govern- 
ment, but  what  American  wants  it?  America,  and  the  American 
character,  have  been  built  up  under  a  system  which  permits  to 
the  individual  the  widest  play  for  initiative,  ambition,  and 
endeavor,  consistent  with  the  maintenance  of  order  and  the  pro- 
tection of  the  community.   Americans  have  no  craving  for  the 
intolerable  bureaucracy  of  Europe,  however  efficient  it  may  be. 
If  we  must  choose  between  freedom  and  efficiency,  Americans  will 
take  freedom. 


-  122  - 


THE  TALE  OF  THE  TAIL  OP  A  COMMA. 

Another  glaring  instance  of  the  misleading  publicity  emitted 
by  the  propagandists  supporting  the  water  and  power  act  is  a 
statement  widely  circulated  in  which  they  charge  the  opponents  of 
the  water  and  power  >vct  with  having  misquoted  the  Act  in  a  pam- 
phlet entitled  "Jaots  for  farmers. " 

In  that  pamphlet  "Pacts  for  Farmers"  the  Greater  California 
League  made  certain  criticisms  of  the  Act  and  quoted  the  partic- 
ular portions  of  the  Act  which  illustrated  and  supported  the 
criticisms.   The  pamphlet  did  not  pretend  to  print  the  entire  Act. 

One  such  criticism  was  that  the  Act  gives  the  Board  the  right 
to  seize  any  property  in  the  State  merely  by  spying  it  wants  it, 
?nd  makes  the  Board  the  sole  and  final  judge  of  whether  condem- 
nation is  necessary.   The  portion  of  Section  14.  proving  that 
the  Board  has  a  right  to  seize  the  property  by  condemnation  and 
that  its  decision  as  to  the  necessity  of  condemnation  j.s  final  and 
conclusive  was  quoted.   The  remainder  of  Section  14,  which  provides 
for  the  payment  of  compensation  for  the  property  so  taken  by 
condemnation  was  not  quoted  because  everybody  know?  that  in  con- 
demnation suits  compensation  must  be  paid.   But  the  comment  in 
acts  Sot   Farmers"  on  Section  14  specifically  staccd  *      .e 
Board  had  to  pay  for  the  condemned  property.   Here  is  the  comment 
on  Section  14  made  in  "Facts  For  Farmer; 

"This  gives,  the  board  the  right  to  sei-c  ary 
property  in  the  State ,  .merely  by  saying     -ts 
it.   There  is  no  review  -  no  appeal.   The 
of  the  Board  is  finr    It  bteps  in  and      pos- 
session at  once.       section  makes  the  < 
ship  of  any  property  in  the  State-  unsafe.    .;e, 
the  board  has  to  p'V  for  c 
but  it  is  the  sole  and  fin        of  w: 
demnation  is  nt  ■ 

-  ua  - 


The  object  of  the  propagandists  supporting  the  Water  and  Power 
Act  in  their  statement  on  this  subject  was  to  create  the  impression 
that  in  "Facts  For  Farmers"  the  fact  that  payment  must  be  made  for 
property  seized  was  suppressed.   The  foregoing  quotation  shows  that 
not  only  was  that  fact  not  suppressed  but  it  was  expressly  stated. 
In  other  words  the  comment  on  "Facts  For  Farmers"  is  misleading 
and  intended  to  be  so. 

It  is  significant  that  tne  only  criticism  of  "Facts  For 
Farmers"  that  the  propagandists  supporting  the  water  and  power  ..-• 
have  published  is  this  false  charge  that  the  pamphlet  "Facts  For 
Farmers"  suppresses  the  fact  that  condemned  property  must  be  paid 
for. 


-  124  - 


&.      '■■     "PLE  C_     ITERATE  DISHONESTY 

A  typical  example  of  the  deliberate  dishonesty  of  the 
propaganda  put  forth  by  the  staff  of  press  agents  and  orators 
employed  in  supporting  the  vrater  and  power  act  is  the  intsntional 
garbling  of  the  railroad  commission's  report  to  the  governor, 
dated  October  18 ,  1920. 

At  page  8  of  their  expensive  64-page  pamphlet  the  water 
and  power  act  propagandists  say; 

"STATE  MUST  AID" 

"WE  BELIEVE  THE  TIME  13  FAST  WHEN  THE  STATE  AS  A 
WHOLE  CAN  AFFORD  TC  SIT  BY  AIT)  WAIT  FOR  THE  SPASMODIC 
DEVELOPMENT  OF  ITS  WATER  RESOURCES  BY  INDIVIDUALS", 
SAYS  THE  COMMISSION'S  REPORT  TO  THE  GOVERNOR.   "THE 
PROBLEM  AS  A  WHOLE  MUST  BE  SOLVED  BY  THE  STATE  AS  SUCH, 
AND  IT  IS  OUR  THOUGHT  THAT  HOW  IS  THE  TIME  FOR  A  COM- 
PREHENSIVE PROGRAM  TO  BE  OUTLINED.   THIS  THE  STATE  CAN 
DO  THROUGH  ITS  POWER  IN  THE  ENACTMENT  OF  LAWS  AND  ITS 
ABILITY  TO  AID  IN  FINANCING.. 

"This  conference  was  formed  of  commission 
representatives  and  representatives  of  other  States  and 
Federal  bodies,  to  meet  the  CRISIS  caused  by  water 
shortage.   In  1920  the  3tate  was  confronted  with  a 
situation  that  threatened  the  very  core  of  its  prosperity. 

"This  work  of  harmonizing  the  different  viewpoints 
enabled  the  people  of  the  State  to  grasp  the  situation 
from  a  broad  point  of  view,  and  means,  we  believe,  the 
ushering  in  of  a  new  era  of  water  development  and  con- 
sequent expansion  of  agricultural,  industrial,  com- 
mercial and  other  interests.   We  believe  that  the  prob- 
lem of  the  conservation  and  distribution  of  water  is 
now,  and  for  the  next  quarter  of  a  century  will  be,  a 
most  important  factor  in  the  development  of  the  State's 
natural  resources.   This  year's  work  looms  large  because 
of  the  CRISIS  which  forced  what  was  felt  by  some  to  be 
drastic  measure,  but  in  the  future  these  measures,  born 
of  necessity,  must  be  regarded  as  merely  preliminary 
and  preparatory  to  the  greater  work.  " 

Reference  to  the  printed  volume  of  the  railroad  com- 
mission's report  shows  that  the  portion  of  the  quotation  printed 

-  12|  - 


in  black  face  type  appears  or.      10  of  the  railroad  commission's 
report  while  the  remainder  of  the  quotation  which  follows  the 
blackface  in  the  64-page  pan.phiet  is  printed  on  page  8  of  the 
commission's  report,  and  in  order  to  make  the  connection  the  text 
has  been  altered.   in  other  words,  the  propaganda  supporting  the 
act  transposes  and  changes  the  railroad  commission's  report  with- 
out indicating  that  fact. 

As  printed  in  the  64-page  pamphlet  with  the  context  and 
repeated  by  the  staff  of  orators  and  press  agents  supporting  the 
water  and  power  act  the  garbled  and  distorted  quotations  from  the 
railroad  commission's  report  would  appear  to  be  an  expression  on 
the  part  of  the  railroad  commission  that  the  State  should  finance 
the  development  of  power  and  water. 

The  railroad  commission  was  not  discussing  power  at  all.' 

It  was  discussing  water  solely.   But  on  page  7  of  the  report^ 

immediately  preceding  some  of  the  language  quoted  in  the  64-page 

pamphlet  the  railroad  commission  says: 

"It  is  the  Commission's  firm  belief  that  financially 
sound  utilities,  functioning  economically  and  efficient- 
ly, will  successfully  carry  the  burden  of  California's 
development.   It  is  obvious  that  industrial  California, 
agricultural  California,  can  not  reach  the  peak  of 
development  unless  there  stride,  a  step  in  advance, 
utilities  carrying  service  possibilities  'ready  on 
demand1.  ■ 

"Such  a  development,  such  a  service,  has  been,  is  and 
will  be  the  aim  of  this  Commission.   It  can  only  be 
accomplished  through  the  fair  distribution  of  the  costs, 
the  fair  treatment  of  utility  consumer,  utility  owner 
and  utility  labor.  " 

In  other  words,  by  twisting  the  railroad  commission's 
language,  and  omitting  a  vital  portion  of  the  text,  the  mendacious 
propagandists  supporting  the  water  and  power  act  intended  to 

-  126  - 


create  an  impression  that  the  railroad  commission  favored  the 
State's  going  into  the  power  business,  whereas  the  commission 
expressly  said  in  that  same  report  that  "financially  sound 
utilities,  functioning  economically  and  efficiently,  will  success- 
fully carry  the  "burden  of  California's  development." 

In  Baying  that  the  problem  as  a  whole  must  be  solved 
by  the  state  as  such  the  railroad  commission  had  in  mind,  as  the 
report  clearly  indicates,  the  possibility  of  the  State's  prepar- 
ing and  financing  a  conn  v.  ehenaive  program  of  water  development. 
That  the  State  is  now  doing  in  its  survey  of  the  water  resources 
of  California  and  for  which  $200,000  was  appropriated  at  the 
last  session  of  the  legislature. 


-  127  - 


REGARD IMG  MYTHICAL  SAVINGS 

Rate  comparisons  made  under  any  other  basis  than 
that  of  general  averages  in  costs  to  the  ultimate  consumer 
after  taking  into  consideration  all  the  varying  factors  in- 
volved are  deceptive.   This  same  fallacy  in  reasoning  can 
creep  into  the  discussion  in  instances  other  than  rates 
charged,   To  give  an  example  of  how  easy  it  is  to  lay  claim 
to  great  savings  when  in  reality  these  savings  should  he 
credited  to  the  march  of  progress  and  invention,  attention  is 
called  to  a  statement  of  the  speaker  at  the  Riverside  meeting, 
of  the  League  of  the  Southwest.   In  speaking  of  the  rate  re- 
ductions claimed  "by  the  more  economic  operation  of  the  Hydro 
Commission,  he  said: 

"If  the  rates  are  reduced,  and  the  consumer  pays 
less  for  the  service  he  received,  that  reduction,  I  main- 
tain, is  the  consumer' 8  dividend,  just  as  much  as  if  a 
check  were  handed  to  him  by  the  municipality  each  month 
for  the  amount  of  the  reduction  in  his  power  and  lighting 
bills  for  the  service  which  he  xeceives,  and  for  the  cur- 
rent used  for  lighting  alone,  Since  the  hydro  municipali- 
ties first  began  to  operate,  the  saving  in  rates  charged 
over  what  would  have  been  paid  at  the  old  rates  amounts 
to  over  $38,000,000,  and  at  least  $20,000,000  more  on 
power  used,  or  a  total  of  over  $58,000,000  paid  to  the 
users  of  power  and  i      the  shareholders  in  the  scheme 
in  ten  years1  operation,  fiv»  of  which  were  fraught  with 
unprecedented  difficulties  created  by  the  greatest  econ- 
omic upheaval  the  world  has  ever  witnessed." 

-  L88  - 


We  axe  wondering  who  will  lay  claim  to  the  fabulous 
paving  in  power  bills  that  has  been  accomplished  in  California 
since  1907  when  the  average  rate  p4id  for  power  generated  was 
2.15  cents  per  kilowatt  hour,  according  to  the  U.  S.  Census, 
vhich  rate,  according  to  the  same  source,  was  reduced  to  1.55 
in  1912  and  1.45  in  1917,  being  raised  again  to  1.55  in  1921. 
Using  the  same  line  of  reasoning  of  the  above  speaker  it  is 
evident  that  the  people  of  California  have  been  pr.id  in  divi- 
dends in  the  for.i  of  reduced  rates  under  the  method  of  utility 
regulation  that  prevails  in  that  state  the  gigantic  total  of 
$192,966,000,  as  estimated  in  the  following  tabulation. 


Yearly  Saving 


Power  Generated 

Rate  Saving 

Dollars 

j    Year 

in  Millions   of 

per  Kw.    in 

Saved 

Kilowatt -Hours 

Cents 

192l" 

4,386 

.6 

$  26,316,006 

:    1920 

3,661 

.65 

23,800,000 

•    1919 

3,311 

.666 

22,050,000 

•18 

3,037 

.675 

20,500,000 

1917 

2,783 

.69 

19,400,000 

I    1916 

2,356 

.675 

15,800,000 

!    1915 

2,168 

.666 

14,450,000 

i    1914 

'25 

.65 

13,160,000 

•    1913 

1,901 

.625 

11,890,000 

1912 

1,653 

.6 

9,910,000 

1911 

1,401 

.5 

7,          .     )0 

:  19 

.    08 

.4 

4,830,000 

I    1909 

1,050 

.25 

2,620,000 

08 

825 

.15 

1.C40.000 

Total  Es 

tiraated  Saving 

$192,966,000 

- 


CALIFORNIA  HAS  NEVER  HAD  THE  CONDITION  THAT  PREVAILED  IN  ONTARIO 
TO  CALL  FOR  THE  FORMATION  OF  A  HYDRO  COMMISSI  OH 

It  is  safe  to  say,  and  indeed  it  is  admitted  "by  practi- 
cally every  economist  who  has  looked  into  the  subject,  that  had 
commission  regulation,  as  prevails  in  the  more  advanced  communi- 
ties of  the  United  States  today,  been  in  existence  at  the  time  of 
the  formation  of  the  Hydro  Electric  Power  Commission  of  Ontario, 
that  commission  never  would  have  "been  brought  into  existence. 
Twenty  years  ago  the  distribution  of  electrical  energy  was  carried 
on  in  the  Province  of  Ontario,  Canada,  with  such  inefficiency, 
such  high  rates,  poor  service,  and  general  disregard  for  the 
rights  of  the  consumers,  that  in  response  to  popular  demand  for 
relief  from  thit.  high-handed  procedure,  after  many  gatherings  of 
various  public  bodies  had  been  held,  the  provincial  government 
was  asked  by  the  municipalities  interested  for  authority  to  under- 
take the  development,  transmission  and  distribution  of  electrical 
power.   Contrast  this  picture  with  the  present  hydroelectric 
situation  in  California  where  the  power  companies,  regulated  by 
the  E      iailroad  Commission,  have  developed  such  efficiency  and 
good  service,  and  have  so  won  the  confidence  of  their  consumers 
that  their  securities  arc  widely  distributed  among  them,  and  where 
reasonable  rates  have  resulted  in  wider  and  more  general  use  of 
electricity  than  in  any  other  locality  in  the  world.   Indeed,  it 
is  doubtful  if  anywhere  in  the  world  o      found  a  district  where 
individual  init.      has  received  more  direct  encouragement,  and 
yet  where  rigid  control  of  public  utility  service  has  advanced  to  so 

-  :3c  - 


high  standards.   The  eyes  of  the  nation  have  constantly  been 
focused  on  California  in  observing  her  progress  in  this  as  well 

many  other  outstanding  accomplishments. 

Instead  of  meeting  the  unpleasant  situation  of  twenty 

rs  ago  by  the  inauguration  of  government  ownership  and  its 
attendant  evils,  the  leaders  of  thought  in  Ontario,  Canada,  might 
have  taken  the  other  course — the  stimulation  of  private  initiative 
in  agriculture  and  industry  as  has  been  done  in  California  by 
placing  these  great  projects  under  rigid  public  regulation  with 
reasonable  rewards  held  out  for  further  development.   Had  this 
been  done,  the  present  day  developments  in  Ontario,  Canada--indus- 
trially,  commercially,  and  agriculturally — should  have  far  exceed- 
ed their  present  proportions,  for  Ontario  is  blessed  with  fertile 
soil,  with  the  world's  greatest  source  of  possibilities  for  cheap 
water  power  development  and  ea~e  in  power  transmission.   Also, 
it  la  important  to  note  that  the  neighboring  province  of  Quebec, 
where  cheap  water  power  is  not  nearly  so  available,  has  complete- 
ly outdistanced  Ontario  in  all  fields  of  economic  development. 
Or,  agr.in  in  ooaparison  with  the  development  that  has  taken  place 
on  the  American  aide,  even  though  steam  auxiliaries  have  been  con- 
structed there  at  great  expense  to  assist  hydroelectric  service 
in  the  New  York  territory,  Ontario  might  under  properly  directed 
and  regulated  private  initi'  txvv.      accomplished  f  .   aro  than 
it  has. 


-  131  - 


A  WELL  KNOWN  PITFALL  IN  SPENDING  THE  PSOPLS '  5  MO'/EY 

Throughout  all  time  one  truism  has  stood  forth  un- 
shattered,  namely,  that  money  not  one's  own  is  more  easily 
spent ,  and  funds  "belonging  to  the  body  politic  disappear  in 
lavish  outlay.   Witness  what  has  been  going  on  in  the  Prov- 
ince of  Ontario,  Canada,  in  what  has  "been  heralded  by  the  pro- 
ponents of  California's  Water  and  Power  Act  as  one  to  be  mod- 
eled after  by  the  citizenry  of  California. 

Governmental  officials  in  Ontario  other  than  the 
Hydro  Commission  are  viewing  v/ith  great  concern  the  costs 
which  have  increased  enormously  over  original  estimated  in- 
vestments involved  in  the  Chippawa  development. 

Quoting  as  an  extract  from  an  address  made  November 
10,  1921,  by  Premier  Drury,  of  Ontario,  before  the  Canadian 
Club  on  the  Hydro  Radial  situation  in  Ontario,  the  Toronto 
Daily  Star  has  the  following  to  say: 

"The  speaker  directed  attention  to  the  Chippawa  de- 
velopment ,  and  pointed  out  that  in  1915  the  scheme  launched 
to  develop  100,000  horsepower  was  to  cost  $10,500,000;  in 

1918  to  develop  the  first  five  unite  and  make  provision  fcr 
275,000  horsepower  the  cost  was  to  be  over  §25,000,000;  in 

1919  the  scheme,  fully  grown  to  develop  500,000  horsepower, 
was  to  cost  $40,000,000.   Last  spring  they  were  assured 
finally  that  to  develop  five  units  and  to  make  water  prepax. 
ations  for  developing  the  rest  of  the  units  that  the  total 
cost  would  be  $54,000,000  or  $55,000,000.   'I  am  betraying 
no  secret,'  remarked  Mr,  Drury,  'when  I  say  since  then  a 
very  serious  situation  has  developed,  that  the  goverrene 

-  132  - 


having  made  all  preparations  to  finance,  having  arranged 
to  finance  the  scheme  at  S?5,000,000,  received  a  most  un- 
pleasant surprise  when  it  was  told  some  few  weeks  ago 
that  it  would  have  to  provide  for  the  completion  of  the 
project  another  $10,000,000.   That  is  very  serious,  and 
in  view  of  our  experience  perhaps  we  could  be  pardoned 
for  lacking  undue  optimism.'  ■ 

This  speech  of  Premier  Drury  took  place  on  November 
10,  1921,  and  indicates  that  the  government  was  already  thor- 
oughly alarmed.  During  the  early  part  of  December  the  newspa- 
pers began  to  print  stories  of  an  additional  $10,000,000  being 
required,  and  in  a  personal  interview  v:ith  Sir  Adam  Beck  in 
Toronto  a  week  later  the  writer  was  informed  by  Sir  Adam  Beck 
himself  that  the  project  would  cost  $80,000,000.   On  top  of 
this  the  Hydro  Commission,  in  order  to  fill  the  canal  to  its 
18,000  sec. -ft.  of  carrying  capacity,  must  under  international 
treaty  borrow  water  from  some  one  of  the  hydro  plants  already 
in  existence  on  the  Canadian  side.   To  meet  this  emergency,  the 
commission  proposes  to  take  over  the  Toronto  Power  Company's 
plant  at  a  cost  of  $30,000,000  which  must  eventually  be  scrapped 
in  order  to  supply  the  water  to  fill  the  Chippawa  Canal.   In  its 
leading  editorial  comment  of  December  31,  Electrical  T.'orld,  the 
leading  electrical  authority  in  America,  had  the  following  to 
say,  under  the  caption  "Ontario  Overshoots  *he  Mar 

"This  week  water  was  let  into  the  canal  cf  the  largest 
hydroelectric  development  in  Canada,  the  Chippawa -Queenston 
station  of  the  Hydro  Electric  Power  Commission  of  Ontario. 
Wonderful  in  conception,  bold  in  engineering  execution  and 

-  13  :'■  - 


mammoth  in  the  size  of  its  units,  the  installation  stands 
as  a  monument  to  the  vision  and  skill  of  that  enthusiastic 
Canadian,  Sir  Adam  Beck.   tut     use  of  untoward  circum- 
stances it  also  stand3  a  monument  to  economic  folly.   The 
Hydro  Electric  Commission  of  Ontario  was  able  to  purchase 
100,000  hp,  from  a  privately  owned  utility,  the  Ontario 
Power  Company,  for  $9  a  horsepower -year ,  and  on  the  strength 
of  that  built  up  the  immense  network  extending  a  thousand 
miles  in  all  directions,  frcm  Niagara  Falls  to  Toronto  on 
the  north,  and  to  Windsor,  opposite  Detroit,  on  the  west. 
Despite  the  fact  that  its  turbines  at  Queenston  operate 
under  a  head  of  ICO  feet  greater  than  that  available  at 
Niagara  Palls,  and  thus  generate  one-third  more  energy  for 
the  same  amount  of  water,  the  Hydro  Slectric  Power  Commis- 
sion of  Ontario  cannot  manufacture  at  Queenston,  much  less 
sell,  a  horsepower -year  of  electrical  energy  for  twice  the 
amount  it  paid  to  the  Ontario  Power  Company  when  the  com- 
pany was  privately  owned  and  operated.   Thus  has  the  Hydro 
Electric  Power  Commission  of  Ontario,  lured  on  by  ambition, 
fallen  into  a  pit  of  its  own  digging," 


-  134  - 


D  ACT  APFSCT  IRHIGATIC 

The  Act  pro\:'des: 

"Section  1  -  It  .is  hereby  declared  to  be  the  policy 
and  purpose  of  tbe  state  to  conserve,  develop  and  control 
the  water  of  the  state  for  the  benefit  of  the  people-  " 

"Section  3  -  The  Eoard  shall  have  power: 

(d)  To  use  the  waters  and  lands  of  the  state  

(e)  To  require  the  reservation  of  water  from  appropriation-- 
(l)  To  exercise  all  powers  needful  for  the  accomplishment 

of  the  parposes  of  this  Article,  " 

The  Board  is  thus  clothed  with  the  power,  which  implies 
the  city  of  preventing  any  further  appropriation  of  water  in  this 
state  by  anyone  except  by  the  permission  and  under  the  control  of 
the  California  water  and  Power  Poard. 

There  is  not  a  stream  of  any  consequence  in  California 
that  is  not  at  present  under  partial  use  for  either  irrigation 
or  power,  yet  very  few,  if  any,  are  developed  to  their  economic 
capacjty.   virtually  all  of  them  are  undergoing  a  progressive 
evolution,  the  conservation,  appropriation  and  use  of  water 
available  from  each  increasing  year  by  year  with  the  growing 
deraandsof  the  territory  tributary  to  it. 

If  the  Water  and  power  Act  is  adopted,  this  process 
will-stop  through  the  withdrawal  of  the  water  from  further  ap- 
propriation, and  a  hundred  thriving  communities  will  find  their 
growth  arrested,  or  even  strangled,  until  the  water  and  Power 
Board  finds  it  "convenient"  or  "desirable"  to  take  over  the 

erprises  now  supplying  them  with  water  and  proceed  with  their 


development.   That  which  is  no     ilable  to  such  communities  as 
a  matter  of  right,  protected  by  law,  will  pass  under  the  juris- 
diction of  a  State  Board,  clothed  with  unlimited  powers  and 
discretion,  which  may  act,  or  refuse  to  act,  permit,  or  refuse  to 
permit  others  to  act,  as  it  sees  fit. 


IS  STATE  AID  AVAILAI  TING  K  -       TC::~Y? 

The  State  Campaign  Committee  of  the  proposed  Water  and 
Power  Act,  in  a  recent  circular,  stated  that 

"Under  the  provisions  of  California's  Water  and  Power 
Act,  State  credit  may  be  secured  for  acquiring  transmission 
lines  and  distributing  system  for  power  from  Iletch-Hetchy.  n 

The  Board  created  by  the  proposed  Act  is  empowered  to 
do  this  under  Section  3  of  the  Act,  which  reads  as  follows; 

"(h)  To  acquire  or  construct  for  political  subdivisions 
distributing  systems  for  water  or  electric  energy  bought 
from  the  state,  upon  terms  that,  in  the  opinion  of  the  board 
will  repay  to  the  state  rithin  twenty-five  years  the  cost 
thereof  with  interest.   The  title  to  or  interest  of  the  state 
in  such  systeus  shall  vest  in  the  political  subdivision 
when  paid  for.  " 

The  conditions  under  which  this  power  may  be  exercised 
are  indicated,  although  not  clearly  defined  in  Section  8,  which 
provides; 

"  --  where  the  rates  are  intended  to  provide  for  the 
repayment  of  the  expenditures  made  in  acquiring  or  con- 
structing distributing  systems  for  political  subdivisions, 
they  shall  so  be  fixed  asin  the  judgment  of  the  Board  will 
repay  the  amount  of  such  expenditures  within  twenty-five 
years.   The  Board  may  change  rates  wlien  in  its  opinion  ad- 
visable to  meet  changed  conditions  — " 

Section  13  of  the  Act  reads  as  follows: 

o thing  contained  in  this  article  shall  prevent  any 

-  I  V  - 


political  subdivision  itself,  or  in  cooperation  with  other 
political  subdivisions,  from  developing  any  water  or 
electric  energy  owned  or  controlled  by  it;  but.  plans  for 
any  such  development  hereafter  proposed  shall  be  submitted 
to  the  board  for  suggestions  and  criticisms,  so  that  the 
cooperation  cf  the  board  may  bo  secured,  if  practicable,  for 
the  fullest  development  of  the  proposed  project.   The  beard 
may  acquire  and  develop  any  such  project  unless  the  politi- 
cal subdivision  claiming  the  same  shall  have  adopted  plans 
and  estimates  for  the  development  and  authorized  bonds  to 
cover  the  cost  thereof,  or  shall  do  so,  within  two  years 
after  the  board  shall  have  notified  such  political  sub- 
division of  its  re;.di;iecs  to  proceed  with  such  development.  " 
If  the  City  of  San  Francisco  desires  aid  from  the  Vater 
and  Power  Board  in  completing  the  Ketch-He fcchy  project,  it  can 
be  obtained  only  if  the  construction,  management  and  operation 
of  the  project  is  taken  over  ty  the  Board,  which  will  have  power 
to  fix  and  change  rates  at  will  until  reimbursed  for  ail  costs, 
at  which  tine  the  DISTRIBUTION  SYSTEI  OFLY  will  pass  into  the 
ownership  of  the  City  of  San  Francisco.   The  Board  has  no  power 
to  aid  a  political  subdivision  in  acquiring  a  municipal  water 
supply.   It  may  aid  a  city  in  securing  or  building  a  water 
distribution  system,  but  only  if  such  a  system  is  operated  by 
the  Board  until  paid  for,  and  then  only  if  the  Board  shall  sell 
water  to  the  city  for  distribution.   And  tnroughout  the  entire 
process  the  Eoard  will  determine  the  cost,  will  keep  the  books, 
and  will  fix  the  rates. 

The  politico-economic  faddists  who  expect  to  control 

-138- 


the  proposed  water  and  power  Board  seem  to  think  that  the 
municipalization  of  utility  property  affords  them  a  splendid 
opportunity  for  exploiting  their  pet  theories  —  and  it  will 
if  they  can  get  by  with  a  scheme  like  this. 


-  139  - 


WHO  PAYS  THE  LOSSES? 

Everyone  knovs  that  there  are  risks  in  the  public 
utility  busineso,  and  everyone  2<nows  there  are  losses. 

Who  paid  tne  los3eo  or  the  '"estern  pacific  Railway? 

Who  paid  the  losses  of  the  Northern  Electric  Railway? 

Who  paidthe  losses  of  the  ocean  Shore? 

Why  the  bondholders  and  the  stockholders  did/ 

Who  paid  the  losses  of  the  Oro  Electric  Corporation 
when  it  sold  properties  which  cost  it  J3, 000,000  for  about  one- 
half  of  this  anount? 

The  bondholders  and  the  stockholders  paid  the  losses; 

Assuming  that  the  water  and  power  Act  should  pass,  and 
that  the  Board  created  should  undertake  water  and  power  develop- 
ments as  contemplated  by  the  Act.   it  is  not  inconceivable  that 
some  of  the  expenditures  which  this  board  will  make  may  turn  out 
to  be  unprofitable  or  even  a  total  loss.   In  such  cases,  it  is 
very  obvious  that  the  cost  of  such  unfortunate  ventures  or  co:  - 
tingencies  will  have  to  be  paid  either  by  the  ratepayer  or  the 
taxpayer.   if  the  ratepayer  is  assessed  with  these  costs,  he  is 
no  better  off  than  under  the  present  conditions  as  pictured  V 
the  proponents  of  the  Water  and  Power  Act,   If  the  ratepayer 
does  not  pay  them,  the  taxpayer  will  be  left  to  carry  all  losses 
due  to  unforeoeenconditions  and  any  and  all  contingencies  that 
arise  in  the  conduct  of  the  business. 


-  140  - 


W.tY  FAT  TERRITORY  MUST  CARRY  LEAN  TERRITORY 

Section  8  of  the  proposed  Water  and  Power  Act  pro- 
vides that  the  Board  "Shall  fix  similar  rates  under  substan- 
tially similar  conditions."  The  slogan  of  the  proponents  of 
this  measure  appears  to  he  "Water  and  Pov:er  at  Cost. "  To  com- 
ply with  Section  8,  the  rates  must  be  uniform  under  "substan- 
tially similar  conditions."  There  is  a  vast  degree  of  lati- 
tude accorded  the  Board  in  adjusting  its  acts  to  fit  the  ex- 
tremes possible  under  these  definitions. 

But  there  is  an  economic  limit  to  the  rates  that  may 
be  charged  for  service,  regardless  of  "cost"  or  "substantially 
similar  conditions."  There  are  numerous  areas  throughout  the 
state  where  "service  at  cost"  v/ould  mean  no  service  at  all, 
because  rates  thus  fixed  would  be  so  high  no  one  would  use  the 
service. 

Obviously,  even  under  the  Water  and  Power  Act,  rates 
would  be  fixed  on  the  theory  that  profitable  projects  must  carry 
the  unprofitable,  that  service  to  lean  territory  must  be  subsi- 
dized by  higher  rates  in  the  fat,  unless  the  Board  should  use 
the  power  given  it  to  draw  at  will  upon  the  state  treasury  to 
make  up  any  deficits  it  may  incur  through  the  development  of 
projects  that  are  unable  to  pay  their  fixed  charges. 

An  excellent  example  of  this  principle  is  to  be  found 
in  the  United  States  postal  service,  which  is  operated  approxi- 
mately at  cost,  as  a  whole,  but  which  has  extended  mail  facili- 
ties to  thousands  of  small  communities  and  rural  routes  where 
the  revenues  are  far  less  than  the  direct  costs  of  operation, 

-  Ul  - 


DID  THE  CALIFORNIA  RAILROAD  COMMISSI OK        "OMMBND 

t:?at  t:^  statz  go  jg  X  33  susirass? 

Some  point  has  been  made  by  supporters  of  the  Water 
and  Power  Act  of  the  fact  that  in  its  report  for  the  year  end- 
ing June  30,  1920,  the  Railroad  Commission  of  California  said: 
"We  believe  the  time  is  past  when  the  State  as  a 
whole  can  afford  to  sit  by  and  wait  for  the  spasmodic  de- 
velopment of  its  water  resources  by  individuals.   The 
problem  as  a  whole  must  be  solved  by  the  State  as  such, 
and  it  is  our  thought  that  now  is  the  time  for  a  compre- 
hensive program  to  be  outlined.   This  the  state  can  do 
through  its  power  in  the  enactment  of  laws  and  its  abili- 
ty to  aid  in  financin  . 

Sep.*\rate  from  itn  conte;:t  in  the  report  and  as  used 
by  the  pamphleteers  and  staff  of  orators  supporting  the  Water 
and  Power  Act ,  it  would  appear  that  the  Commission  intended  to 
suggest  that  the  State  of  California  should  po   into  the  power 
business.  A  reading  of  the  letter  of  transmittal  accompanying 
the  report  from  which  the  quotation  was  taken  makes  it  plain 
that  the  Railroad  Commission  did  not  have  in  mind  state  financ- 
ing of  power  projects.   It  had  in  mind  only  the  possibility  of 
the  State' 8  financing  the  work  of  preparing  a  comprehensive 
program  to  be  outlined.   That  is  what  the  State  is  now  doing 
in  its  survey  of  the  Water  resources  of  California  now  in 
progress,  and  for  which  200  thousand  dollars  was  appropriated 
by  the  last  legislature,  Supporters  of  the  Water  and  Power  Act 
neglect  to  quote  the  following  from  the  same  letter  of  trans- 
mittal accompanying  the  same  report  of  the  Railroad  Commission: 

-  L4S  - 


"It  is  the  Commissior'     rra  belief  that  financially 
sound  utilities,  functioning  economically  and  effieientl  , 
will  successfully  carry  the  burden  of  California's  devel- 
opment.  It  is  obvious  that  industrial  California,  agri- 
cultural California,  cannot  reach  the  peak  of  development 
unless  there  stride,  a  step  in  advance,  utilities  carry- 
ing service  possibilities  'ready  on  demand.' 

"Such  a  development .  such  a  service,  has  been,  is  and 
will  be  the  aim  of  this  Commission.   It  can-only  be  accom- 
plished through  the  fair  distribution  of  the  costs,  the 
fair  treatment  of  utility  consumer,  utility  owner  and  util- 
ity labor. ■ 


-  143  - 


SUPPORTING  A  COMPETING  INDUSTRY  WITH  TAX  MONEY 

The  Water  and  Power  Act,  the  proposed  constitutional 
amendment  to  be  voted  upon  by  the  people  of  California  next 
November,  contains  provisions  which  make  it3  defeat  a  matter  of 
vital  interest  to  every  manufacturer  in  that  state,  since  its 
passage  would  amount  to  the  socialization  of  all  industry.    If 
pansed,  it  v/ould  permit  a  politically  appointed  board  of  five  men 
to  engage  in  any  business  from  growing  peanuts  to  the  operation  of 
sawmills  or  drilling  for  oil.   This  unknown  board  with  500  million 
dollars  of  state  bonds  at  it3  command,  in  addition  to  many  other 
powers,  would  be  specifically  empowered  to  "acquire,  produce, 
MANUFACTURE,  or  otherwise  provide  facilities,  materials  and 
supplies,  raw  or  finished,  and  any  property,  or  anything  necessary 
of   convenient" . 

While  the  act  is  ostensibly  created  to  allow  this  board, 
as  a  state  agency,  to  go  into  the  business  of  a  water  and  irriga- 
tion company,  and  the  business  of  a  hydroelectric  li^ht  and  power 
company,  it  is  permitted  to  go  into  any  business  that  it  thinks 
necessary. 

This  means  not  merely  that  the  bor.rd     t  go  into  the 
business  of  providing  cement  or  gravel,  or  power  pl.uit  equipment, 
or  manufacturing  poles  and  electric  appliances,  but  that  under 
these  provisions  there  would  be  nothing  to  stop  it  frc       ctur- 
ing  the  cotton  materials  required  in  the  households  o:  its  e:  ployeB 
or  from  opening  canneries  or  laundries  to  meet  their  needs.   Nor 

-  1 


does  the  law  provide  that  they  shall  not  go  farther  and  sell 
material  to  the  public.   There  is  nothing  which  could  not  be  in- 
cluded under  this  clause.   It  is  further  provided  that  there 
could  be  no  appeal  from  the  edicts  of  the  board.   Those  industries 
which  the  board  did  not  wish  to  "acquire"  could  be  ruined  by 
competition.  And  all  this  would  be  part  of  the  fundamental  law 
of  the  state  incorporated  in  the  constitution  and  not  to  be  chang- 
ed except  by  the  cumbersome  processes  of  the  popular  vote. 

In  thi3  connection  it  is  well  to  remember  that  to  the 
board  is  delegated  the  additional  authority  to  appoint  as  many 
employes  as  it  thinks  necessary  and  to  fix  their  compensation  as 
it  sees  fit.    It  takes  no  stretch  of  the  imagination  to  visualize 
the  amazing  political  machine  which  could  be  developed  within 
these  limits. 

There  is  no  need  for  the  state  going  into  the  water  and 
power  business  in  the  first  place,  it  being  efficiently  administer- 
ed by  private  companies.   Go-rernment  may  properly  regulate  in- 
dustry, but  it  must  not  invade  its  field  as  a  competitor  or  as  a 
monopoly.   The  functions  of  the  state  are  political--there  is 
now  too  much  government  in  business.   Such  a  proposal  to  set 
aside  the  principles  of  American  government  and  to  place  more 
complete  authority  in  political  hands  as  is  incorporated  in  the 
Water  and  Power  Act  was  never  witnessed  in  soviet  Russia  or  in 
North  Dakota. 


-  145  - 


<L  AKD  Jo.   ADAMS 

Criticism  of  the  Water  and  Power  Act  to  be  voted  on 
as  an  amendment  to  California's  constitution  was  voiced  at  a 
recent  meeting  of  the  Commonwealth  Club  by  Edward  F.  Adams, 
noted  writer  on  economic,  financial  and  agricultural  topics, 
after  a  careful  analysis  of  the  scheme. 

"As  a  citizen  not  only  of  California  but  of  the 
United  States,"  said  Adams,  "I  object  to  adding  half  a  billion 
dollars  to  the  already  excessive  and  grov/ing  volume  of  tax 
free  securities.    I  doubt  the  wisdom  of  deliberately  creating 
by  constitutional  provisions  3uch  a  tremendous  political  en- 
gine as  the  proposed  water  and  power  board  would  be.    I  shall 
vote  against  it  because  it  is  proposed  by  initiative  petition, 
to  which  signatures  were  procured  by  hired  solicitors.  But  if 
this  were  proposed  spontaneously  by  unsolicited  voters  I  would 
still  oppose  it,  because  for  the  people  to  borrow  to  an  ulti- 
mate limit  of  $500»00°i000  with  which  to  incur  such  a  burden 
of  responsibility  and  risk  where  private  capital  is  ready,  if 
needed,  to  make  the  investment  and  assume  the  ri3k  and  let 
representatives  of  consumers  fix  the  price  of  the  product  is 
evidence  of  advanced  and  widespread  mental  degeneracy,  from  . 
whose  shocking  results  I  would  vote  to  save  the  race  to  which 
I  belong. 

"I  have  no  concern  with  the  expropriation  of  private 
systems  at  their  fair  value.   Their  securities  are  widely  dis- 
tributed and  if  paid  off,  the  money  could  easily  be  reinvested. 
The  managers  and  employes  would  lose  their  jobs  and  s-il  ries, 

-  146  - 


which  would  go  to  tho  appointees  of  the  board.   It  v/ould  be 
the  fortune  of  politics.  But  that  suggests  that  the  board 
is  to  have  the  power  to  employ  ■whomsoever  it  pleases,  in 
such  numbers  as  it  thinks  best  at  such  compensation  as  it 
may  determine  and  all  v/ithout  regard  to  existing  civil  ser- 
vice rules.  And  I  may  add  that  I  do.  not  believe  that  five 
men  could  be  found  in  the  state  to  whose  uncontrolled  judg- 
ment v?e  could  safely  entrust  such  complete  control  of  the 
waters  of  the  state  and  of  the  power  developed  from  them 
as  this  proposed  statute  would  confer  on  the  board  which  it 
would  create. " 


-  147  - 


JIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIMIIIIIIIIIIIIIIIMIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIK 


We  Proposed 
$500,000,000 

Water  and  Power  Bill 

for 

California 


THK  text  of  this  proposed  enactment  which 
will  be  placed  upon  the  ballot  in  November 
for  the  citizens  of  the  State  of  California  to 
vote  upon   i-   reprinted  here   in   full. 

This  is  supplemented  by  a  series  of  3  arti- 
cles which  have  appeared  in  recent  issues  of 
the  Journal  of  Klectricity  and  Western  Indus- 
try by  Robert  Sibley.  Editor.  These  article* 
deal  with  a  comparison  of  the  provisions  of  thi- 
proposed  enactment  as  compared  with  the  onl> 
parallel  project  which  has  ever  been  put  into 
operation,  namely,  that  of  the  governmental 
development  of  the  water  power  in  the  Province 
of  Ontario.  Canada. 

Mr.  Sihle>  made  a  personal  investigation 
of  the  Canadian  situation  and  presents  his  de- 
ductions in  thi>  mt t-rt  -t  in u  series  of  articles 
reprinted  herewith. 

business  executive,  every  industrial 
official,  every  property  owner — in  fact.  tMf] 
ill i/m  of  this  state  is  vitally  interested  in 
knowing  the  facts  of  this  proposed  legislation. 


Compliments  of 


Journal  ^Electricity 

<"»/ Western  Industry 


RIALTO  BUILDING         SAN  FRANCISCO 

An  independent  semi-monthly  electrical  ami  industrial  publication  serving  no 
special  interests  but  devoted  to  the  upbuilding  and  the  development 
of  the  natural  resources  of  the  West  along 
sound  economic  lines. 


;iiiiiiiiiiiiiin iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiMiiiiiiiiiiiiiiiiiiiiiMiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiMiiiiMiiiniMiiiMiiiiiiiiiiiiiiiir 


Copyright 

McGraw-Hill  Company  of  California 

Publishers  of 

JournaKElectricity 

western  Industry 

April,    1922 


Resume  of 

10  Possible  Results  Under  the  Water  and  Power  Bill 

—  if  Adopted 

1.  The  creating:  of  a  vast  self-perpetuating;  political  machine  (hiring-  and 
firing  are  wholly  within  the  control  of  the  five  super-governors  of  the 
state  who  may  be  on  the  governing  board). 

2.  The  opening  of  metal  mines,  cement  works,  textile  mills,  machine 
shops,  canneries,  laundries,  etc. — under  state  control  in  competition 
with  private  concerns. 

.'$.  Cut-throat  competition  with  present  power  systems.  The  duplication 
of  transmission  lines,  distribution  systems  and  generating  plants  with 
the  ultimate  resulting  higher  costs  to  the  consumer. 

4.  The  abandonment  of  the  principle  of  regulation  and  the  resulting 
unfair  distribution  of  power  costs  between  consumers,  determined  by 
the  particular  bias  of  those  in  control. 

&    The  development  of  the  state's  resources  by  that  portion  of  the  state 
which  asks  for  them  first — the  furthering  of  the  interests  of  one  sec- 
tion of  government  served  at  the  expense  of  another  which  recei 
its  power  from  private  companies. 

6.  The  increase  of  taxes.  Owing  to  the  lesser  amount  of  taxes  paid  by 
the  district  doing  away  with  its  public  utilities,  the  remainder  of  the 
state  and  other  sources  of  revenue  will  have  to  bear  a  larger  share. 

7.  The  lessening  of  market  value  of  all  private  securities  placed  on  the 
market,  owing  to  the  competition  of  this  great  block  of  tax  free  bonds. 

i.  High  power  rates  to  farmers.  Owing  to  their  distance  from  power 
sources  and  the  long  stretch  of  lines  needed  for  each  farm,  costs  will 
grow  beyond  the  ability  of  the  farmer  to  meet  them. 

9.  The  failure  of  certain  portions  of  the  enterprise  to  meet  re<iuired 
returns,  especially  during  the  first  tew  \eais.  and  the  consequent  levy- 
ing of  a  tax  for  payment  of  bonds  and  intei 

10.  Increasing  burdens,  through  the  gradual  growth  of  the  system — a 
tendency  more  and  more  to  spread  into  related  enterprises,  to  take  up 
■  lines  of  manufacturing,  to  control  irrigation,  as  well  as  power. 
A  growing  feeling  of  irritation  on  the  part  of  certain  sections  of  the 
state  against  others  who  have  greedily  reached  for  all  in  sight  and 
shifted  tax  burdens  from  their  own  shoulders  to  those  of  their  neigh- 
In. is.  Numerous  weaknesses  and  failings  in  the  Act.  which  are  not 
now  apparent  but  which  will  develop  in  operation.  At  the  same  time 
a  giowing  power  on  the  part  of  the  controlling  hoard  and  a  great  diffi- 
culty in  bringing  about  a  reform  through  popular  vi 

Once  this  lair  is  voted,  neither  governor  nor  legislature  could  revise 
its  provision-.      There  is  no  appeal  from  the  decisions  of  the  go 
eming  board. 


Journal  of  Electricity  and  Western  Industry 


Proposed  $500,000,000  Power  Bill  For  California 

Complete  Text  of  the  California  Water  and  Power  Act  Providing  for 
State  Controlled  Power  Development 


Section  1.  It  is  hereby  declared  to  be  the 
policy  and  purpose  of  the  state  to  conserve, 
develop  and  control  the  waters  of  the  state  for 
the  use  and  benefit  of  the  people. 

Sec.  2.  The  California  Water  and  Power 
Board,  hereinafter  called  the  board,  is  hereby 
established,  composed  of  five  members  who  shall 
be  appointed  by  the  governor,  one  of  whom  he 
shall  designate  as  chairman  and  executive  offi- 
cer, who  shall  devote  all  his  time  to  the  duties 
of  the  office.  The  members  shall  be  qualified 
electors  of  the  state  and  shall  be  so  appointed 
as  to  be  fairly  representative  of  the  state 
geographically  and  of  its  irrigation  and  muni- 
cipal interests.  Members  shall  hold  office  for 
four  years,  except  that  of  those  first  appointed, 
one  shall  hold  office  until  January  1,  1924,  one 
until  January  1 ,  1925,  one  until  January  1 , 
1926,  and  two  until  January  1,  1927.  The 
chairman  shall  receive  a  salary  of  fifteen  thou- 
sand dollars  per  annum.  The  other  members 
shall  receive  a  per  diem  of  twenty  dollars  while 
engaged  in  the  performance  of  duty  and  all 
members  shall  receive  their  necessary  expenses. 
The  legislature  may  increase  their  compensa- 
tion. Each  member  shall  execute  to  the  state 
such  bonds  as  the  governor  may  require.  The 
legislature  shall  have  power  by  a  two-thirds 
vote  of  all  of  its  members  to  remove  any  one  or 
more  of  the  members  of  the  board  from  office 
for  dereliction  of  duty  or  corruption  or  incom- 
petency ;  and  it  shall  be  the  duty  of  the  legis- 
lature to  provide  by  law  for  the  removal  of 
members  by  recall,  following  so  far  as  perti- 
nent the  provisions  of  Article  XXIII  of  the 
constitution,  except  that  a  successor  of  any 
member  recalled  shall  be  appointed  by  the 
governor  for  the  unexpired  term,  as  shall  be 
done  in  the  case  of  a  vacancy  otherwise  aris- 
ing. The  majority  of  the  members  shall  consti- 
tute a  quorum  for  the  transaction  of  business 
and  no  vacancy  in  the  board  shall  impair  the 
right  of  the  remaining  members  to  exercise 
all  powers  of  the  board.  The  board  shall  main- 
tain its  office  at  Sacramento. 

Sec.  3.  The  board  shall  have  power: 
(a)  To  acquire  by  purchase,  lease,  condemna- 
tion, gift  or  other  legal  means,  land, 
water,  water  rights,  easements,  electric 
energy  and  any  other  property  necessary 
or  convenient  for  the  purposes  of  this 
article,  and  likewise  to  acquire,  and  also 
to  construct,  complete  and  operate,  works, 
dams,  reservoirs,  canals,  pipe-lines,  con- 
duits, power  houses,  transmission  lines, 
structures,  roads,  railroads,  machinery  and 
equipment,  and  to  do  any  and  all  things 
necessary  or  convenient  for  the  conser- 
vation, development,  storage  and  distribu- 
tion of  water,  and  the  generation,  trans- 
mission and  distribution  of  electric  energy. 
No  electric  energy  shall  be  purchased  by 
the  board  at  a  price  to  exceed  one  half 
of  one  cent  per  kilowatt  hour  at  the 
power  plant,  based  upon  a  fifty  per  cent 
load  factor,  except  for  standby  service  as 
provided    in    Section    twelve    hereof ; 

(b)  To     purchase     acquire,     produce,     manufac- 

ture or  otherwise  provide  facilities,  mater- 
ials and  supplies,  raw  or  finished,  and  any 
property  or  thing  necessary  or  convenient 
to  the  accomplishment  of  the  purposes  of 
this  ai*ticle.  ; 

(c)  To   supply  water  or  electric  energy  or  both 

to  the  state,  political  subdivision  and  other 
users,  and,  subject  to  the  provisions  of  this 
article,  to  prescribe  the  terms  of  contracts, 
and  fix  the  price  therefor  and  collect  the 
same ; 

(d)  To    use    the    waters    and    the    lands    of    the 

state,  or  any  material  therein  or  thereon, 
and  to  require  the  reservation  from  sale  or 
other  disposition  of  such  lands  and  ma- 
terial as,  in  the  opinion  of  the  board,  will 
be  required  for  the  purposes  of  this  article ; 

(e)  To    require    the   reservation   of    water    from 

appropriation  for  such  periods  as  it  may 
provide ; 

(f)  In  the  name  of  the  state  to  apply  for  and 

accept,  under  the  provisions  of  the  laws  of 
the  United  States  or  of  any  state,  grants, 
permits,  licenses  and  privileges  in  the  opin- 
ion of  the  board  necessary  for  the  accom- 
plishment of   the   purposes  of  this   article  ; 

(g)  To  co-operate  and  contract  with  political 
subdivisions  of  this  state,  and,  with  the 
approval  of  the  governor,   with  the  United 

>sl!itoc        art  A       nthor       eta  toe         (■■dnfpvnitur       1  li  i  ■ 


other  waters  and  the  generation  and  use 
of  electric  energy  and  the  acquisition,  con- 
struction, completion,  maintenance  and  op- 
eration of  works  necessary  or  convenient 
for  the  accomplishment  of  the  purposes  of 
this  article ; 
(h)  To  acquire  or  construct  for  political  sub- 
divisions distributing  systems  for  water  or 
electric  energy  bought  from  the  state,  upon 
terms  that,  in  the  opinion  of  the  board, 
will  repay  to  the  state  within  twenty-five 
years  the  cost  thereof  with  interest.  The 
title  to  or  interest  of  the  state  in  such 
systems  shall  vest  in  the  political  subdivis- 
ion when  paid  for ; 
(i)  To  sue  and  to  be  sued,  and  to  exercise  in  the 
name  of  the  state  the  power  of  eminent 
domain  for  the  purpose  of  acquiring  any 
property,  or  the  use  or  joint  use  of  any 
property,  deemed  by  the  board  necessary 
for  the  purposes  of  this  article ; 
(j)  To  provide  itself  with  suitable  office  and 
field  facilities,  and  to  appoint,  define  the 
duties  and  fix  the  compensation  of  such 
expert  and  technical  officers,  legal  and 
clerical  assistants  and  other  employes  as  it 
may  require,  subject  to  such  civil  service 
regulations  as  the  board  may  provide  ; 
(k)  To   define   projects  and   to   adopt   rules   and 

regulations   to  govern   its  activities ; 
(1)    To   exercise   all   powers   needful   for  the   ac- 
complishments  of  the  purposes  of  this   ar- 
ticle   and    such    additional    powers    as    may 
be  granted  by  the  legislature. 

Sec.  4.  The  California  Water  and  Power 
Finance  Committee,  herein  called  the  commit- 
tee, is  hereby  established,  composed  of  the  gov- 
ernor, controller,  treasurer,  chairman  of  the 
Board  of  Control  and  chairman  of  the  Califor- 
nia Water  and  Power  Board,  all  of  whom  shall 
serve  thereon  without  compensation.  A  major- 
ity of  the  committee  shall  constitute  a  quorum 
for    the    transaction    of    business. 

Sec.  5.  Bonds  of  the  State  of  California,  not 
exceeding  the  sum  of  five  hundred  million  dol- 
lars (unless  additional  bonds  are  duly  authorized 
by  law),  may  be  issued  and  sold  from  time  to  time 
to  carry  out  the  purposes  of  this  article,  and 
the  full  faith  and  credit  of  the  State  of  Cali- 
fornia is  hereby  pledged  for  the  payment  of 
the  principal  of  said  bonds  as  the  same  mature, 
and  the  interest  accruing  thereon  as  the  same 
falls  due. 

Sec.  6.  Bonds  herein  authorized  shall  be 
issued  and  sold  by  the  committee  as  herein 
provided  and  shall  be  serial  bonds,  payable 
in  not  more  than  fifty  years  from  date 
of  issuance,  and  shall  be  in  such  form  or 
forms  and  denomination  or  denominations,  and 
subject  to  such  terms  and  conditions  of  issue, 
conversion,  redemption,  maturities,  payments, 
and  rate  or  rates  of  interest,  not  exceed- 
ing six  per  cent  per  annum  payable  semi- 
annually, and  time  or  times  of  payment  of  in- 
terest, as  the  committee  from  time  to  time  at 
or  before  the  issue  thereof  may  prescribe.  The 
principal  and  interest  thereof  shall  be  payable 
in  United  States  gold  coin.  Said  bonds  shall  be 
signed  by  the  treasurer,  and  countersigned  by 
the  governor,  by  his  engraved  signature  and 
the  great  seal  of  the  State  of  California 
shall  be  impressed  thereon ;  all  coupons  there- 
to shall  be  signed  by  the  treasurer  by  his 
engraved  or  lithographed  signature.  The  board 
shall  pay,  from  funds  available  to  it,  the 
expense  of  issuing  and  selling  such  bonds  and 
the  necessary  expenses  of  the  committee  in  con- 
nection  therewith. 

Bonds  herein  authorized  may  from  time  to 
time  first  be  offered  at  not  less  than  par  as  a 
popular  loan,  under  such  regulations  prescribed 
by  the  committee  from  time  to  time,  as  will  in 
its  opinion  give  the  people  as  nearly  as  may 
be  an  equal  opportunity  to  participate  therein  ; 
but  the  committee  may  make  allotment  in  full 
upon  applications  for  smaller  amounts  of  bonds 
in  advance  of  any  date  which  it  may  set  for 
the  closing  of  subscriptions  and  may  reject  or 
reduce  allotments  upon  later  applications  and 
applications  for  larger  amounts,  and  may  reject 
or  reduce  allotments  upon  applications  from  in- 
corporated banks  and  trust  companies  for  their 
own  account  and  make  allotment  in  full  or 
larger  allotments  to  others,  and  may  establish 
a  graduated  scale  of  allotments,  and  may  from 
time  to  time  adopt  any  or  all   of  said  methods, 

KhrtuM     an v     Qiir»Vi     Oftir»r>     Vtc    dc^iYiorl     rw     it    tn    Ko    in 


tion  or  increase  of  allotments  of  such  bonds 
shall  be  made  under  general  rules  to  be  pre- 
scribed by  said  committee  and  shall  apply  to  all 
subscribers  similarly  situated.  Any  portion  of 
the  bonds  so  offered  and  not  taken  may  be 
otherwise  disposed  of  by  the  committee  in  such 
manner  and  at  such  price  or  prices,  not  ti 
than  par,  as  it  may  determine.  The  committee 
may  cancel  any  of  the  bonds  so  offered  and 
not  taken  and  reissue  them  in  different  denom- 
inations. 

Sec.  7.  Bonds  herein  authorized  shall  be 
issued  and  sold  only  for  the  acquisition  of  such 
property  and  rights,  and  for  the  acquisition, 
construction,  development,  completion,  opera- 
tion and  maintenance  of  such  projects  as  the 
board  may  deem  necessary  or  convenient  to  the 
accomplishment  of  the  purposes  of  this  article ; 
Provided,  that  from  time  to  time  upon  written 
requisition  of  the  board  the  committee  shall 
issue  and  sell  bonds  not  exceeding  in  the  aggre- 
gate five  million  dollars,  the  proceeds  of  which 
shall  be  placed  in  the  Water  and  Power  Revolv- 
ing Fund  in  the  state  treasury,  which  fund  is 
hereby  created,  to  be  used  by  the  board  for  the 
purpose  of  defraying  its  expenses,  acquiring 
property,  rights,  facilities,  materials  and  sup- 
plies, carrying  charges  during  construction  and 
meeting  other  costs  incurred  in  carrying  out 
the  purposes  of  this  article:  Provided,  further, 
that  if  at  any  time  the  revenues  from  projects 
shall  be  insufficient  to  pay  the  interest  on  "and 
principal  of  outstanding  bonds  as  the  same  fall 
due,  the  committee,  with  the  consent  of  the  gov- 
ernor, in  order  to  avoid  appropriations  from  the 
general  fund  and  resulting  taxation,  may  issue 
and  sell  bonds  to  provide  funds  required  to  make 
such  payments  of  interest  or  principal. 

Except  as  otherwise  provided  in  this  article. 
the  committee  shall  issue  and  sell  bonds  only 
upon  the  written  requisition  of  the  board  stat- 
ing the  amount  of  money  required  and  the  pur- 
pose for  which  it  is  to  be  used  and  accompanied 
by  a  duly  authorized  certificate  of  the  board 
describing  the  property  or  rights  to  be  acquired 
or  the  project  proposed,  and  stating  the  esti- 
mated cost  thereof  and  showing  the  same  to 
have  been  investigated  and  approved  and  in  the 
case  of  a  project,  that  plans  and  estimates 
therefor,  a  copy  of  which  shall  be  annexed  to 
such  certificate,  have  been  prepared  and  adopted 
by  the  board  and  further  certifying  that,  in  the 
opinion  of  the  board,  the  revenue  from  the 
property  or  rights  to  be  acquired  or  from  the 
proposed  project,  together  with  available  reve- 
nues from  other  projects,  will  be  sufficient  to 
pay  within  fifty  years  in  addition  to  other  neces- 
sary expenses,  the  principal  and  interest  of  the 
bonds  requested  to  be  issued.  The  proceeds  of 
the  sale  of  such  bonds  shall  be  placed  in  the 
treasury  and  shall  be  used  by  the  board  exclu- 
sively for  the  purposes  for  which  the  same 
were  issued. 

Sec.  8.  The  board  shall  establish  such  rates 
for  service  as  in  its  judgment  will  provide,  in 
addition  to  the  expenses  of  operation,  mainte- 
nance, depreciation,  insurance  and  reserve  for 
losses,  funds  to  pay  the  principal  and  inter- 
est of  all  bonds  issued  under  this  article, 
as  the  same  fall  due,  together  with  all  sums 
which  may  be  advanced  from  the  general  fund 
and  interest  thereon  as  herein  provided. 

Each  project,  as  the  same  may  be  defined  by 
the  board,  shall  be  charged  by  the  board  with 
its  cost,  which  shall  include  its  proper  share 
as  fixed  by  the  board  of  all  expenditures  from 
the  Water  and  Power  Revolving  Fund  and  the 
share  so  charged  shall  be  credited  to  such  re- 
volving fund  which  shall  be  replenished,  to  the 
extent  of  the  amount  so  credited,  from  the 
proceeds  of  bonds  sold  to  provide  funds  for  the 
cost  of  such  project.  The  board  shall  estab- 
lish such  rates  for  the  service  furnished  by  each 
project  as  in  its  judgment  will  pay,  within  fifty 
years,  such  cost  thereof,  and  the  expenses  of 
operation,  maintenance,  depreciation,  interest, 
insurance  and  reserve  for  losses;  provided  that 
where  the  rates  are  intended  to  provide  for  the 
repayment  of  expenditures  made  in  acquiring  or 
constructing  distributing  systems  for  political 
subdivisions,  they  shall  be  so  fixed  as  in  the 
judgment  of  the  board  will  repay  the  amount  of 
such  expenditures  with  interest  within  twenty- 
five  years.  The  board  may  change  rates  when 
in  its  opinion  advisable  to  meet  changed  condi- 
tions and  shall  always  keep  its  rates  as  near 
the  amount  required  to  pay  such  cost  and  ex- 
wnsps  hk  rtrapticfthle.  and  shall  fix  similar  rates 


Journal  of  Klkctkicitv  and  Western  Industry 


».  All  revenues  of  the  board,  except 
proceeds  from  th«  sale  of  I., ml*,  shall  be  paid 
Into  the  •tats  treasury  and  •hall  ba  applM  Ant 
lo  payment  of  tba  expenses  of  tba  board,  cost* 
•  lion,  msintensnre.  depreciation.  In.ur- 
anca  and  laim,  and  Mcond.  to  In*  payment  of 
interest  on  and  principal  of  laid  bond*. 

If  at  any  tlnw  tha  moneys  In  the  state  trva>- 
ury  appllrabla  to  tha  payment  of  Intaraat  or 
Principal  of  said  bond*.  shall  ba  InauAViant  to 
isy  tha  same  as  It  falls  dua.  monaya  shall  ba 
temporarily  advanrad  from  lha  ganaral  fund  for 
that  purpoaa.  and  thara  la  haraby  approprlatad 
from  tha  general  fund  in  tha  atata  traaaury  such 
•u-i  annually  aa  will  ba  necessary  to  pay  aurh 
intaraat  and  principal,  and  thara  ahall  ba  col- 
lected aach  yaar  In  tha  aama  manner  and  at  tha 
aama  tlma  aa  other  atata  revenue  la  collected 
•oeh  nm  In  addition  to  tha  other  revenue*  of 
tha  atata  aa  ahall  bo  required  to  pay  tha  aama 
appropriated  for  paymant  of  Intaraat  and  prin- 
cipal aa  herein  provided,  and  it  la  hereby  made 
the  duty  of  all  officers  charged  by  law  with  any 
duty  with  reirard  to  the  levy  and  collection  of 
•aid  revenue  to  do  and  perform  each  and  every 
act  which  ahall  ba  neraaeary  to  collar*  such 
additional   aim. 

All  moneys  paid  from  tha  general  fund  In 
tha  atata  traaaury  for  principal  of  or  intaraat 
on  auch  bonds  ahall  ba  returned  into  aald  gen- 
eral fund  out  of  tha  revenues  of  tha  board  aa 
aoon  aa  the  aama  become  available,  together 
with  Intaraat  thereon  from  tha  several  dates  of 
such  advances  until  ao  returned  at  tha  rata  of 
six  par  rant  par  annum  compounded  semi- 
annually. 

Sac  I*.  Out  of  any  money  in  tha  atata 
traaaury  not  otherwise  appropriated,  tba  aim  of 
two  hundred  and  fifty  thousand  dollars  la  hereby 
appropriated  to  ba  credited  to  the  board  and  an 
equivalent  amount  ahall  ba  returned  into  the 
general  fund  in  tha  atata  treasury  out  of  the 
first  monaya  available  in  the  Water  and  Power 
Revolving   Fund. 

Sac  II.  Tha  committee  may  establish  auch 
funds  In  tha  atata  traaaury  as  in  its  judgment 
may  ba  required  to  carry  out  tha  purposes  of 
this  article. 

Monaya  herein  provided  for  the  board  ahall 
be  drawn  from  tha  traaaury  by  warrants  of  tha 
controller  on  demands  made  by  the  board  and 
allowed  and  audited  by  tha  State  Department  of 


1  In  board,  lha  controller,  the  treasurer  and 
nlttaa  ahall  keep  full  and  particular 
record  of  all  their  proceedings 
this  article,  and  shall  transmit  to  the 
governor  annually  a  report  thereof,  not  leaa  than 
one  thou— d  copies  of  which  ahall   be  printed. 


to  ba  by  tha  governor  laid  before  tha  as 
tur«  biennially,  and  all  books  and  papers  ». 
taining  to  the  matters  provided  for  In  thta  ar- 
ticle. •  hall  at  all  times  ba  open  to  the  Inspec- 
tion of  any  officer  or  citizen  of  tha  state.  All 
accounts  of  rereipta  and  disbursement,  shall  ba 
audited  annually  by  tha  State  Department  of 
Finance. 

Sac  It.  Tba  atata  and  political  aabffivudoa* 
ahall  have  a  preferred  right  to  water  and  electric 
energy  controlled  by  tha  board  aa  against  pri- 
vately owned  public  utilities  selling  water  or 
electric  energy  to  tha  public  and  no  contract  or 
act  of  the  board  ahall  Interfere  with  auch  pre- 
ferred right.  Aa  between  those  otherwise  equally 
entitled,  tha  board  shall  supply  water  or  electric 
energy  to  political  subdivisions  near  the  source 
of  supply,  to  tha  extant  of  their  reasonable 
nuns.  In  preference  to  those  mora  remote. 

The  board  ahall  not  aupply  water  to  a  pri- 
vately owned  public  utility  for  the  production 
of  electric  energy  and  ahall  not  aupply  directly 
or  indirectly  to  privately  owned  public  utilities 
which  sell  electric  energy  or  water  to  tba  public 
mora  than  twenty  par  cant  of  tba  total  amount 
of  electric  energy  or  water  under  its  control, 
and  contracts  therefor  ahall  not  extend  over  a 
longer  period  than  five  years,  or  be  renewed 
before  one  year  prior  to  their  expiration.  Be- 
fore making  or  renewing  such  a  contract,  tha 
board  ahall  publiah  a  notice  of  Its  intention  so 
to  do  at  least  six  days  each  week  for  a  period 
of  sixty  daya  In  at  least  one  newspaper  pub- 
lished and  circulated  in  thla  state  and  desig- 
nated by  order  of  the  board  for  lhat  purpoaa : 
and  at  least  thirty  days'  prior  notice  ahall  be 
mailed  to  the  legislative  bodies  of  all  counties 
and  Incorporated  municipalities  and  to  Irrigation 
districts  situate  within  the  territory  which,  in 
this  opinion  of  tha  board,  may  use  auch  electric 
energy.  Public  utilities  taking  sucn  contracts 
shall  be  required  to  provide  tba  board  wltii 
standby  service  at   reasonable  rates. 

Sec.  IS.  Nothing  contained  In  this  article 
shall  prevent  any  political  subdivision  itself,  or 
in  cooperation  with  other  political  subdivisions, 
from  developing  any  water  or  electric  energy 
owned  or  controlled  by  it;  but  plana  for  any 
such  development  hereafter  proposed  ahall  be 
submitted  to  the  board  for  suggestions  and  crici- 
clsm.  so  that  tha  cooperation  of  the  board  may 
ba  secured,  if  practicable,  for  the  fullest  devel- 
opment of  tha  proposed  project-  The  board  may 
acquire  and  develop  any  such  project  unless  tba 
political  subdivision  claiming  the  aama  ahall 
have  adopted  plana  and  estimates  for  the  de- 
velopment and  authorized  bonds  or  made  other 
provisions  to  rover  the  coat  thereof,  or  ahall  do 
so.  within  two  years  after  tha  board  shall  have 


notified   auch    political 
neea  to   process1   with   aura 

Sac    II.     la   say    | easy, as   la 

mala  brought  by  tba  board  aasjsr  tha  I  '  ' 
hereof,  the  determination  of  taw  board  that  taw 
taking  of  tba  property  Inrrlais  fa.  the  rasa- 
plaint  la  ainsaaiy  far  tba  ■■rami  hereof,  ahsJI 
ba  conclusive  rrideaee  of  aach  aiiss.llj  la 
any  each  prinasallaa  tba  state  may  take  1  mfl 
ate  poasaastoft  and  use  of  any  property  recsared 
for  tha  purposes  of  this  article,  by  paying  lata 
the  court  each  smoaat  of  money  aa  tha  eoan. 
upon  Ave  days'  notice  to  tha  adverse  party,  assy 
determine  aa  reasonably  a<ii|usli  to  asrara  to 
tba  owner  of  tba  property  soagbt  fa  as  taken 
s    payment    of    fast        ni|  lanll  ii    far 

trial  by  jary   may  ba 
by    aay    party    thereto, 
and  any  pro  issuing  begun  under  tha  iiiiiitoluaai 
of  Section  Urn  of   Article   XII  of  this    nanus 
lion  shall  ba  iHeaalinf  on  tba  alias;  thereia  of 

a  written  demand  by  sack  party/.     Sacs)   I I 

must  be    filed    within    thirty   days   after   service 
upon  such  party  of  [.reuses  la  aach  lauiasssag 

Property  appropriated   to   pablli    asa   may   ba 
taken   under  tba  power  of 
the   purpose 

herein    provided,    this    article 
power  to  take  tha 
controlled    by 
proposed  to  be  i 
trie  energy,  or  both,  without  Ha 

Sec    IS.     All 
siona  and  sgenriee  shall 
board    all    date   and    Infill —Ibis    la 
required  by 
legists  ni  a  la  their  power  la 
tha  provisions  of  this  article 

See.    1*.     As 
with   the  speed 
the  board  ahall  so  ah  ape  Ha 
work  during  periods  of 

Sac   IT.     Tba 
used  la   this  article.  Is 
and  Include  aay  public  board,  public 
poration.     p 

lighting  district,  municipal   atllity  district. 
lie    utility   district,    irrigation 
corporation,     town,    city    and 
county,    bavins;    authority    to 
uae  of 


to  include  aay  privately  owned 
Sac    Is.      This    artiefa    Is 


Its  purposes  snd  to  facilitate  Ha 


Supporting  a  Competing  Industry  With  Tax  Money 


TBI  Water  ami  Power  Act.  the  proposed  constitu- 
tional amendment  to  be  voted  upon  by  the  people 
of  California  next  November,  contains  provisions 
which  make  its  defeat  a  matter  of  vital  interest  to  every 
manufacturer  in  that  state,  since  its  passage  would 
amount  to  the  socialization  of  all  industry.  If  passed, 
it  would  permit  a  politically  appointed  board  of  five 
mm  to  engage  in  any  business  from  growing  peanuts 
to  the  operation  of  sawmills  or  drilling  for  oil.  This 
unknown  board  with  500  million  dollars  of  state  bonds 
at  its  command,  in  addition  to  many  other  powers,  would 
be  specifically  empowered  to  "acquire,  produce.  M  \  M 
1  \(  II  Kl  .it  otherwise  provide  facilities,  materials 
and  supplies,  raw  or  finished,  and  any  property,  or 
anything  necessary  or  conveniem 

While  the  act  is  obstensibly  created  to  allow  this 
board,  as  a  state  agency,  to  go  into  the  business  of  a 
water  and  irrigation  company,  and  the  business  of  a 
hydroelectric  light  and  power  company.  It  is  permitted 
to  go  into  any  business  that  it  thinks  necessary. 

This  means  not  merely  that  the  board  might  go 
into  the  business  of  providing  cement  or  gravel,  or 
power  plant  equipment,  or  manufacturing  poles  and 
electric  appliances,  but  that  under  these  provisions  there 
would  be  nothing  to  stop  it  from  manufacturing  the 
cotton  materials  required  in  the  households  of  its  em- 
ployes or  from  opening  canneries  or  laundries  to  rneet 


their  needs.  Nor  does  the  law  provide  that  they  shall 
not  go  farther  and  sell  material  to  the  public.  There 
is  nothing  which  could  not  be  included  under  this  clause. 
It  is  further  provided  that  there  could  be  no  appeal 
from  the  edicts  of  the  board.  Those  Industries  which 
the  board  did  not  wish  to  "acquire"  could  be  ruined  by 
competition.  And  all  this  would  be  part  of  the  funda- 
mental law  of  the  state  incorporated  in  the  i 
and  not  to  be  changed  except  by  the 
cess  of  the  popular  vote. 

In  this  connection  it  is  well  to  remember  that  to 
the  board  is  delegated  the  additional  authority  to  ap- 
point aa  many  employes  as  it  thinks  necessary  and  to 
Ax  their  compensation  as  it  sees  fit.  It  takes  no  stretch 
of  the  imagination  to  visualise  the  surtaxing  political 
machine  which  could  be  develeptii  within  these  Until*. 

There  is  no  need  of  the  state's  going  into  the  water 
and  power  business  in  the  first  place,  it  being  esnctcntly 
administered  by  private  companies.  Government  May 
properly  regulate  industry,  but  it  must  not  mvade  it* 
Aeld  as  a  competitor  or  as  a  monopoly.  The  fustrtioa* 
of  the  state  are  political— there  is  now  too  ranch  gov- 
ernment  in  business.  Such  •  prepevaal  to  set  aside  the 
principles  of  American  government  and  to 
complete  authority  in  political  hands  as  is 
in  the  Water  ami  Power  Act  was 
soviet  Russia  or  in  North  Dakota. 


Journal  op  Electricity  and  Western  Industry 


California    Should    Profit   by    the    Experience    of    Ontario 

Results  of  Twenty  Years  of  Government  Development  of  Water  Power  in  the 

Province  of  Ontario  Compared  with  the  Same  Period  of  Growth 

Under  Private  Initiative  in  California 


TO  those  engaged  in  the  electrical  industry  in 
California,  and  to  those  who  have  watched  the 
unfolding  of  the  gigantic  hydroelectric  program 
unsurpassed  in  ingenuity  and 
daring  which  has  been  under- 
taken by  the  present  power  com- 
panies, the  proposed  Water  and 
Power  Act,  which  will  be  placed 
on  the  ballot  of  that  state  next 
November,  is  a  challenge  not  to 
be  disregarded.  To  those  who 
are  familiar  with  the  history  of 
the  triumph  over  geographical  and  climatic  difficul- 
ties which  has  placed  California  in  the  forefront  as 
a  manufacturing  state  and  has  made  possible  the 
development  of  a  diversified  agriculture  which  has 
been  a  bulwark  against  national  depression,  this  pro- 
posal to  shackle  the  state  with  an  uneconomic  and 
visionary  scheme  seems  unbelievable.  The  proposal 
of  this  scheme  warrants  a  full  discussion  of  the 
facts,  and  I  believe  that  when  the  facts  are  known 
to  the  people  of  the  state,  it  will  be  found  that  the 
faith  and  the  confidence  of  the  pioneers  of  electrical 
development  will  not  have  been  misplaced. 

The  Journal  of  Electricity  and  Western  Indus- 
try is  dedicated  to  telling  the  story  of  the  funda- 
mental role  of  electricity  in  western  growth.  My 
belief  in  the  future  industrial  and  agricultural  pros- 
perity of  California  and  the  West  through  the  eco- 
nomic development  of  its  hydroelectric  resources  by 
private  initiative  is  nothing  short  of  a  religion! 
It  was  this  conviction  coupled  with  a  desire  to  get 
the  facts  at  first  hand  that  led  me  to  visit  the  Prov- 
ince of  Ontario,  Canada,  for  the  purpose  of  investi- 
gating the  claims  made  in  a  paper  read  by  a  personal 
representative  of  Sir  Adam  Beck,  the  recognized 
genius  of  the  Hydro  Electric  Power  Commission  of 
Ontario,  Canada,  at  a  meeting  of  the  League  of  the 
Southwest,  held  in  Riverside,  California,  last  Decem- 
ber. These  claims  as  to  the  success  of  this  particular 
method  of  power  development  which  have  been  tried 
out  in  Ontario,  form  a  large  part  of  the  arguments 
of  the  advocates  of  the  proposed  Water  and  Power 
Act  in  California.  I  do  not  doubt  the  sincerity  of 
the  proponents  of  this  measure,  but  from  a  personal 
and  intimate  investigation  of  the  Ontario  develop- 
ment, I  cannot  but  believe  that  they  must  have  been 
misinformed  regarding  many  of  the  claims,  or  igno- 
rant of  the  actual  facts. 

Why  the  Commission  was  Formed 

Before  discussing  the  physical  aspects  of  the 
development  of  hydroelectric  power  from  Niagara 
and  its  distribution  in  the  Province  of  Ontario  it  is 
of  primary   importance    to    consider    the  condition 


3!nii:iiiiiiiiiiiiiiiiiiiiiiii!iniiiiiiiiHiiiiiiiiiiimuiiiililiiiiiiiiiiiiiiiii:iiiii.iiii!i:ii;iiii:iiii;iiiaiiiiiiiiiiiiiiiiiiiiiiiiii;iii£ 

THIS  article  is  the  first  of  a  series  of  three 
based  upon  a  personal  investigation  by 
Mr.  Sibley  of  the  operations  of  govern- 
ment development  of  hydroelectric  power  in 
the  Province  of  Ontario.  The  following  arti- 
cles will  deal  with  a  comparison  of  rates,  the 
extent  of  agricultural  service,  and  a  statis- 
tical comparison  of  the  growth  of  California 
contrasted   with   Ontario. 

7ii]ii::!ii;i!iiiiiiiiiiiiiiiiii:i!iiiiiiiiiii!iiii:!iiiniuiiiiiiiiiii:iiiiiliiiiiiiiiiiiiiiiiiiiii!iiiiiiiii!iiiiiiiir!iiiii:iiiiiiiiiiiiiiiiii^ 


which  led  to  the  formation  of  the  Hydro  Electric 
Power  Commission  in  that  Province.  Previous  to 
this  time,  some  twenty  years  ago,  the  distribution 
of  electrical  energy  was  carried 
on  with  such  inefficiency,  such 
high  rates,  poor  service  and  gen- 
eral disregard  for  the  rights  of 
the  consumers  that  in  response 
to  a  popular  demand  for  relief 
from  this  high-handed  proced- 
ure, after  many  gatherings  of 
various  public  bodies  had  been 
held,  the  Provincial  Government  was  asked  by  the 
municipalities  interested,  for  authority  to  undertake 
the  development,  transmission  and  distribution  of 
electrical  power.  Contrast  this  picture  with  the 
present  hydroelectric  situation  in  California,  where 
the  power  companies,  regulated  by  the  State  Railroad 
Commission,  have  developed  such  efficiency  and  good 
service,  and  have  so  won  the  confidence  of  their  con- 
sumers that  their  securities  are  widely  distributed 
among  them;  and  where  reasonable  rates  have  re- 


A  construction  view  of  the  Queenston  power  house,  looking  from  the 
American  side  of  the  river.  One  of  the  penstock  units  of  55,000  hp.  has 
been  installed.  The  plans  call  for  an  ultimate  capacity  for  the  plant  of 
between  500,000  and  600,000   hp. 

suited  in  a  wider  and  more  general  use  of  electricity 
than  in  any  other  locality  in  the  world.  In  fact,  the 
conditions  which  gave  rise  to  the  Ontario  Commis- 
sion have  never  existed  at  any  time  in  the  history 
of  California! 

An  Opportunity  Overlooked 

Instead  of  meeting  the  unpleasant  situation  of 
twenty  years  ago  by  the  inauguration  of  government 
ownership  and  its  attendant  evils,  the  leaders  of 
thought  in  Ontario,  Canada,  might  have  taken  the 


Joiknai.   of    ki.KfflUC.TY   aS'd   ttExTUKS'    IS'M'MTHY 


other  course, — the  stimulation  of  private  initiative 
in  agriculture  ud  Industry  M  has  been  done  in  Cali- 
fornia by  placing  these  great  projects  under  rigid 
DUbUe  regulation  with  reasonable  rewards  held  out 
further  development.  Had  this  been  done,  the 
present  day  developments  in  Ontario,  Canada — in- 
dustrially, commercially  and  agriculturally — should 
have  far  exceeded  their  present  proportions,  for 
Ontario  is  blessed  with  fertile  soil,  with  the  world's 
greatest  source  of  possibilities  for  cheap  water  power 
development  and  ease  in  power  transmission.    Also. 


and  conducted  as  government  and  municipal  enter- 
prises. This  would  directly  discourage  private  ini- 
tiative or  inventive  genius  in  the  whole  electrical 
industry  which  in  but  a  single  generation  has  under- 
gone such  gigantic  changes  that  apparently  only  a 
mere  beginning  in  accomplishment  has  been  effected 
to  date.  California,  on  the  other  hand,  has  by 
encouragement  of  individual  initiative  and  private 
enterprise,  harnessed  its  water  powers  and  spanned 
its  deserts  and  mountain  gorges  with  energy-bearing- 
power  lines,  developing  that  state  industrially  and 


<>Hn«    (i>dn»l»ftrit    «o<t< 


>  nun  of  witor  powar  on  th*  American 

■nainpownt  and  rorroundad  by  eompara- 
■dalaium  flow  I*  1*0.000  mead-tot.  but 
may    b*   r*dur*d     to    IM.000    **rond-f*»t. 

manrv  with  In*  condition*  farad  In  d*v»l- 

•   W*at. 


tnl  to  note  tliat  the  Mighborittf  prov- 
ince of  Quel>ec,  where  cheap  water  power  is  not 
nearly  so  available,  has  completely  outdistanced  On- 
tario in  all  fields  of  economic  development.  Or. 
again  in  eomparisou  with  the  development  that  has 
taken  place  on  the  American  n  though  steam 

auxiliaries  have  been  constructed  there  at  great 
penae  to  assist  hydroelectric  service  in  t!  York 

territory.  Ontario  might  under  properly  directed  and 
regulated  private  initiative  have  accomplished  far 
more  than  it  has. 

•  i>m-    Results   in   Ontario 

This  type  of  thinking  in  Ontario  which  is  the 

It  of  government  ownership  has  resulted  in  the 

belief  that  all  related  indu  -■  nch  as  electrical 

manufacturing   and    the    preparation    of    semi-raw 

materials  neopscarv  in  const  mcti-in    should  lw>  owihil 


Airplane   view  of   the   lntak*   of   th*    Wrlland    Riv.. 
Nota  th*  comparatively    l*v*l   character  of   th*   country 
tariatie  of  th*   Province  of   Ontario.      Compare   thi*   with 
mountain  and  daatrt  of  our   weetern  state*. 


agriculturally  in  spite  of  these  difficulties  to  a  degree 
that  dazzles  the  imagination. 

Let  us  then  trace  the  progress  of  the  Ontario 
thinking  and  follow  its  development.  In  1903  the 
Provincial  Government  passed  legislation  authoriz- 
ing the  municipalities  to  borrow  money  and  to  under- 
take, individually  and  jointly,  to  generate,  transmit 
and  deliver  power,  and  also  to  appoint  a  commission 
of  three  to  five  men  to  operate  and  control  the  sys- 
tem. As  a  consequence  of  this  early  activity  the 
year  1906  witnessed  the  Legislature  of  Ontario  pass- 
ing what  is  known  as  'The  Power  Commission  A 

Under  this  legislation  a  Hydro  Klectric  Power 
Commission  was  created  consisting  of  three  mem- 
bers, of  which  Sir  Adam  Beck  is  the  chairman.  This 
commission  has  power  to  acquire  by  purchase  or 
develop  under  its  own  initiative  the  hydroelectric 
enterprises  of  the  Province  of  Ontario,  and  in  addi- 
tion to  undertake  such  manufacturing  enterprises 
as  it  may  deem  proper  in  the  progress  of  its  work. 
The  commission  also  has  power  to  acquire  by  pur- 
chase, or  otherwise,  and  hold  shares  in  any  incor- 
porated company  carrying  on  the  business  of  operat- 
ing, supplying  and  distributing  electrical 


Act  Gives  a  Practical  Monopoly 

This  act  has  been  amended  and  broadened  from 
year  to  year  so  that  today  its  authority  is  practically 
absolute  in  the  Province  of  Ontario.  There  is  one 
important  difference,  however,  in  the  Ontario  plan 

and    thp   oiiinns*sH   Cnlifnrnin   Water  anrl    Pnuar   Art 


Journal  of  electricity  and  western  industry 


It  is  possible  in  Ontario  for  the  Premier  and  Provin- 
cial Legislature  to  over-ride  the  Hydro  Commission, 
although  at  present  the  Commission  is  so  strongly 
entrenched  in  Ontario,  it  is  recognized  that  it  would 
be  an  extremely  difficult  task  to  bring  this  about. 
In  California,  on  the  other  hand,  the  enactment  pro- 
poses a  constitutional  amendment  that  so  establishes 
a  Board  of  five  men  in  control  that  only  under  the 
recall  provision  of  a  two-thirds  vote  of  the  Legisla- 
ture of  the  state  can  their  hand  be  stayed. 

Let  us  now  examine  in  detail,  how  power  devel- 
opment for  a  municipality  is  accomplished  in  On- 
tario. In  order  to  develop  power  in  the  Province  of| 
Ontario  under  authority  of  this  Hydro  Electric^ 
Power  Commission  of  Ontario,  a  municipality  wish-|f 
ing  to  join  the  partnership  must  by  vote  of  its  city 
council  first  appeal  to  the  Hydro  Commission  for 
data  covering  costs  involved  and  later  submit  these 
findings  to  a  vote  of  the  people  for  final  disposal. 
This  final  vote  is  taken  in  order  to  enter  properly 
into  a  binding  contract  to  insure  the  municipality's 


A  cross  section  of  the  55.000-hp.  units  being  installed  at  the  Queenston- 
Chippawa  development  of  the  Hydro  Electric  Power  Commission  of  On- 
tario. They  are  the  largest  units  thus  far  manufactured  for  hydroelectric 
development. 

share  of  the  obligation  involved.  All  municipalities 
sign  the  same  form  of  contract  and  agree  to  assume 
the  same  obligations,  the  amount  of  these  obligations 
depending  on  the  service  rendered;  that  is,  a  muni- 
cipality located  200  miles  from  the  source  of  supply 
must  pay  a  higher  rate  per  horsepower  and  assume 
a  larger  financial  obligation  than  a  municipality 
located  only  20  miles  from  the  generating  plant  and 
using  the  same  amount  of  power.  While  the  Hydro 
Electric  Power  Commission  has  supreme  charge  of 
the  extended  development  in  its  care,  each  munici- 
pality must  elect  its  own  local  commission  to  handle 
the  business  of  its  own  local  system;  all  rates  for 
service  being  fixed  by  the  Provincial  Commission. 

Although  the  progress  of  growth  of  the  Hydro 
Electric  Power  Commission  activities  are  described 
by  its  proponents  as  being  phenomenal,  those  of  us 


HOHt  -  INDUSTRY 


FARM 


This  chart  illustrates  the  difference  in  cost  involved  in  developing  hydro- 
electric power  in  California.  Compare  this  with  the  map  of  the  Ontario 
development.  Heavy  investment  in  giant  storage  reservoirs,  miles  of 
tunnels  and  ditches  and  often  hundreds  of  miles  of  transmission  lines,  is 
required  in  California. 

familiar  with  the  vast  decade  of  hydroelectric  con- 
struction that  has  just  been  completed  in  California 
see  little  in  those  accomplishments  to  fire  the  imag- 
ination. The  facts  are  that,  while  from  1910  to 
1920  the  Hydro  Electric  Power  Commission  of  On- 
tario actually  constructed  and  put  into  operation 
something  under  sixty  thousand  new  devel- 
oped horsepower  with  a  total  announced  building 
program  of  only  500,000  additional  horsepower, 
those  having  in  charge  the  inter-connected  system  of 
California  have  built  and  put  into  service  over  800,- 
000  new  developed  horsepower  and  have  let  major 
contracts  involving  an  additional  million  and  three- 
quarters  horsepower  for  the  next  ten  years'  period. 
The  major  portion  of  the  Hydro  Electric  Power 
Commission's  activities  in  the  Province  of  Ontario 
seem,  on  the  other  hand,  to  have  been  devoted  to 
taking  over  systems  already  built,  and  the  statement 
of  its  growth  including  these  activities  is  as  follows : 


Number  of 

19  2  0 

Total  Load  in 

Year 

Urban  Muni- 

Number of 

Total  Number 

% 

cipalities 

Townships 

of  Consumers 

Delivered  in  Hp 

1910 

10 

750 

1911 

26 

15,214 

1912 

36 

34,967 

31,019 

1913 

51 

7 

65,689 

45,602 

1914 

82 

12 

96,844 

76,977 

1915 

112      • 

18 

120,828 

103,959 

1916 

166 

25 

148.732 

167.661 

1917 

179 

34 

170,916 

333,399 

1918 

193 

41 

183,987 

316,592 

1919 

208 

42 

216,086 

328,176 

1920 

217 

43 

244.388 

355,798 

1921 

232 

44 

Although  Ontario  is  approximately  twice  the 
area  of  California  these  two  states  are  comparable 
in  that  at  the  time  of  the  formation  of  the  Hydro 
Electric  Power  Commission  Ontario  equaled  Cali- 
fornia in  population,  agriculture  and  industry.  When 
we  consider  that  Ontario  had  available  the  largest 
single  source  of  easily  developed  power  at  her  very 
door,  and  that  the  development  of  energy  in  Cali- 
fornia is  attended  with  the  greatest  engineering  diffi- 
culties, the  growth  of  California  is  nothing  short  of 
phenomenal. 


.    Of    I'.I.Ki'TKICITY    AND    WESTKRN    INDUSTRY 


A   \i«w  of  the  forehay   above  the  Queenston   power  hone*,   looking  toward  the  American  side  of  the  river.     Note  the  ripple  stabiliser. 
•  vertical   tongue  of  concrete,    situated    in   the  center  of   the   canal    where    it    broadens     into   the    triangular 

The  Great  Chippawa  Development 
We  come  now  to  a  brief  presentation  of  the  one 
great  contribution  that  the  Hydro  Commission  is 
making  to  engineering — the  Chippawa  Development 
at  Niagara  Falls.  But  although  bold  in  conception 
as  an  engineering  enterprise,  its  financial  return  in 
cheap  power  is  challenged  by  many  noted  experts, 
.md  the  present  administration  of  the  Province  of 
Ontario  views  with  some  concern  the  costs  to  which 
the  project  has  mounted  as  they  vastly  exceed  the 
original  figures  involved. 

To  those  familiar  with  present  power  develop- 
ment at  Niagara  Falls  it  will  be  recalled  that  all  of 
the  water  power  development  has  thus  far  made  use 
of  simply  the  main  falls  of  the  river  of  some  two 
hundred  feet  without  utilizing  the  rapids  that  exist 


A    sklerh    c 

the   Intake 
fall 


m     t           ^* 

.      . 

*    VI 

i  tried    to    ft    (i 

show  In*-  how  water 
■»ini   eight  utiles  hesow 

awaiikMteJ  IM  ft.  of 
ll  lakes  Ilea*    msaa 

for  several  miles  down  stream.  By  tapping  the 
waters  of  Niagara  River  above  the  falls  and  by  the 
utilization  of  the  Welland  River,  and  a  power  canal 
eight  miles  in  length,  it  is  made  possible  to  conduct 
18,000  sec.-ft.  of  water  to  a  point  below  the  rapids  at 
Queenston,  thus  enabling  the  utilization  of  an  addi- 
tional one  hundred  feet  of  fall  over  that  available 
at  Niagara  Falls. 

From  an  engineering  viewpoint  this  project  is 
interesting.  Not  only  does  the  gigantic  canal  show 
in  its  construction  unusual  skill,  but  the  water  tur- 
bines of  55,000  hp.  capacity  installed  in  this  plant 
usher  in  new  records  in  accomplishment  in  water 
wheel  design.  This  plant  when  completed  is  de- 
signed to  generate  between  500,000  to  600,000  hp. 
Two  units  of  55,000  hp.  are  now  in  preliminary 
stages  of  operation. 

The  Financial  Difficulties 

Coming  to  the  financial  aspects  of  the  situation, 
however,  it  will  be  instructive  to  see  how  the  gov- 
ernmental officials  in  Ontario  other  than  the  Hydro 
Commission  are  viewing  the  costs  which  have  in- 
creased enormously  over  original  estimated  invert 
ments  involved  in  this  Chippawa  development. 

Quoting  as  an  extract  from  an  address  made 
November  10,  1921,  by  Premier  Drury,  of  Ontario, 
before  the  Canadian  Club  on  the  Hydro  Radial  situ- 
ation in  Ontario,  the  Toronto  Daily  Star  has  the 
following  to  say: 

"The  speaker  directed  attention  to  the  Chippawa  d*v*J- 
opment.  and  pointed  out  that  in  1915  the  schoms  !■— tat.  to 
develop  100.000  horse  power  wm  to  coat  $10,500,000;  in  1918 

velop  the  first  Ave  unit*  and  make  provision  far  S7&,000 
horsepower  the  coat  was  to  be  over  WS.000,000:  in  1919  the 
scheme,  fully  frown  to  develop  500.000  horsepower,  was  to 

.<  40.000,000.  Last  sprint  they  were  assured  finally  that 
to  develop  five  unit*  and  to  make  water  preparatioaa  for  de- 
veloping; the  rest  of  the  uniu  that  the  total  cast  would  ho 
♦54.000.000  or  ftt.000.000.     'I  am  betrayiftf  no 

marked  Mr.  Drury.  '«»«»  '  •**  •*■**  "•■.*„! 
situation  has  developed,  that  the  go 
preparations    to    finance,    having 
scheme  at  $55^00.000.  received  a 
when  it  was  told  some  few  weeks  ago  that  it 
,de  for  the  completion  of  the  project  aaoti* 
That  is  very  serious,  and  in  the  view  of  our  * 


10 


Journal  of  Electricity  and  Western  industry 


A  general  view  of  the  vertical  section  of  the  Chippawa  Canal,  showing 
the  level  agricultural  character  of  the  land  through  which  the  canal 
passes.  In  the  distance  is  the  fill  where  the  canal  was  changed  from 
vertical  to  trapezoidal  shape  in  order  to  cross  the  gorge  at  the  whirlpool 
of  the  rapids. 

This  speech  of  Premier  Drury  took  place  on 
November  10,  1921,  and  indicates  that  the  govern- 
ment was  already  thoroughly  alarmed.  During  the 
early  part  of  December  the  newspapers  began  to 
print  stories  of  an  additional  $10,000,000  being  re- 
quired, and  in  a  personal  interview  with  Sir  Adam 
Beck  in  Toronto  a  week  later  the  writer  was  in- 
formed by  Sir  Adam  Beck  himself  that  the  project 
would  cost  $80,000,000.  On  top  of  this  the  Hydro 
Commission,  in  order  to  fill    the  canal  to  its  18000 


sec.-ft.  of  carrying  capacity,  must  under  interna- 
tional treaty  borrow  water  from  some  one  of  the 
hydro  plants  already  in  existence  on  the  Canadian 
side.  To  meet  this  emergency,  the  commission  pro- 
poses to  take  over  the  Toronto  Power  Company's 
plant  at  a  cost  of  $30,000,000  which  must  eventually 
be  scrapped  in  order  to  supply  the  water  to  fill  the 
Chippawa  Canal.  In  its  leading  editorial  comment 
of  December  31st,  Electrical  World,  the  leading  elec- 
trica  lauthority  in  America,  had  the  following  to  say, 
under  the  caption  "Ontario  Overshoots  the  Mark" : 

"This  week  water  was  let  into  the  canal  of  the  largest 
hydroelectric  development  in  Canada,  the  Chippawa-Queens- 
ton  station  of  the  Hydro  Electric  Power  Commission  of  On- 
tario. Wonderful  in  conception,  bold  in  engineering  execution 
and  mammoth  in  the  size  of  its  units,  the  installation  stands 
as  a  monument  to  the  vision  and  skill  of  that  enthusiastic 
Canadian,  Sir  Adam  Beck.  But  because  of  untoward  circum- 
stances it  also  stands  a  monument  to  economic  folly.  The 
Hydro  Electric  Commission  of  Ontario  was  able  to  purchase 
100,000  hp.  from  a  privately  owned  utility,  the  Ontario  Power 
Company,  for  $9  a  horsepower-year,  and  on  the  strength  of 
that  built  up  the  immense  network  extending  a  thousand 
miles  in  all"  directions,  from  Niagara  Falls  to  Toronto  on  the 
north,  and  to  Windsor,  opposite  Detroit,  on  the  west.  Despite 
the  fact  that  its  turbines  at  Queenston  operate  under  a  head 
of  100  feet  greater  than  that  available  at  Niagara  Falls,  and 
thus  generate  one-third  more  energy  for  the  same  amount  of 
water,  the  Hydro  Electric  Power  Commission  of  Ontario 
cannot  manufacture  at  Queenston,  much  less  sell,  a  horse- 
power-year of  electrical  energy  for  twice  the  amount  it  paid 
to  the  Ontario  Power  Company  when  the  company  was  pri- 
vately owned  and  operated.  Thus  has  the  Hydro  Electric 
Power  Commission  of  Ontario,  lured  on  by  ambition,  fallen 
into  a  pit  of  its  own  digging." 

The  question  of  the  actual  accomplishments  of 
government  ownership  in  Ontario  in  the  lowering  of 
rates  and  the  development  of  industry,  as  compared 
with  the  accomplishments  of  private  enterprise  in 
California  will  be  taken  up  in  the  second  article  of 
this  series,  to  appear  in  the  Journal  of  Electricity 
and  Western  Industry  for  April  1st. 


M.,.1     ,,f     tho     t 


JolKN'AI.    UK    hl.M  TICK  ITY    AND    WESTERN     INIH'STKV 


11 


Cost  of  Electric  Energy  in  California  Compared  with  Ontario 

Public  Utilities  in  California  are  Making  Energy  Available  to  Their  Consumers 

at  a  Cost  Far  Less  Than  in  Ontario  when  Differences  in  Taxes 

and  Physical  Difficulties  are  Taken  Into  Consideration 


IN  comparing:  the  cost  of  electric  power  to  the 
people  of  California  and  to  that  portion  of  Canada 
receiving  power  from  the  Hydro  Electric  Power 

Commission    it    is    important  to  

remember  that  Niagara  Falls. 
combining  its  continuous  flow  of 
water  with  its  large  volume, 
should  make  the  production  of 
continuous  power  the  cheapest 
for  any  part  of  the  American 
continent.  Yet  the  privately 
owned  and  publicly  regulated  electric  utilities  in 
California  are  making  energy  available  to  their  cus- 
tomers at  costs  comparable  with  those  paid  for 
energy  in  Ontario,  notwithstanding  the  physical 
difficulties  inherent  in  the  development  of  water 
power  in  California. 

In  this  connection  it  would  seem  especially  im- 
portant to  establish  the  facts  pertaining  to  the  dis- 
tribution of  energy  to  agricultural  territory  in  Cali- 
fornia and  Ontario.  In  the  speech  of  the  personal 
representative  of  Sir  Adam  Beck  at  the  Riverside 
meeting  of  the  League  of  the  Southwest  last  Decem- 
ber, we  find  the  following  statement: 

"We  are  supplying  power  to  practically  all  the  cities 
and  towns  in  our  Province,  all  of  the  larger  villages,  and 
most  of  the  small  ones,  and  have  already  constructed  over 
500  miles  of  pole  lines  to  supply  rural  customers  in  various 
parts  of  the  province,  and.  so  great  has  been  the  demand  for 
power  in  rural  districts,  that  at  the  last  session  of  our  Pro- 
vincial Legislature,  an  amendment  to  the  Power  Commis>ii>n 
Act  was  passed,  whereby,  for  the  purpose  of  power  supply, 
the  Commission  is  authorized  to  divide  the  Province  up  into 
known  as  'Rural  Power  Districts,'  the  boundaries 
of  these  districts  being  fixed  arbitrarily,  according  to  the  dis- 
tance power  can  be  supplied  economically  from  existing  power 
centers,  or  from  lines  or  power  centers  that  might  be  estab- 
li-hed  for  this  purpose 

The  speaker  neglected  to  state  that  this  action 
on  the  part  of  the  Ontario  Legislature  of  1921  had 
been  brought  alwut  due  to  the  findings  of  a  legisla- 
tive committee  appointed  by  the  Legislative  Assem- 
bly of  Ontario  to  advise  concerning  a  more  equitable 
system  of  distribution  of  hydroelectric  power  and  a 
more  uniform  price,  wherein  the  U>gislative  Com- 
mittee had  the  following  comment  to  make:  "The 
amount  of  power  !>eing  used  by  the  Hydro  Elect  ric- 
her Commission  on  the  various  systems  in  the 
.nice  is  :>:;7.17n  lip.,  and  of  this  only  2,500  I 
less  than  one  per  cent  is  supplied  to  the  agricultural 
unit;  When  we  compare  this  situation  to  the 

"K)  farms  of  California  that  today  have  the  most 
wonderful  service  in  the  world  with  a  connected  load 
of  over  a  half-million  horsepower,  which  is  13  per 
cent  of  the  entire  connected  load,  we  see  how  fortu- 
nate the  agricultural  communities  of  California  have 
been  in  baring  the  service  not  of  500  but  of  15,000 
miles  of  rural  lines. 


THIS  article  Is  the  inond  of  ■  series  of 
thrrr  bused  upon  a  personal  investigation 
bjr  Mr.  Sibley  of  the  operations  of  govtrn* 
ment  development  of  hydroelectric  power  in 
tne  I'nuince  of  Ontario.  The  following  arti- 
cle will  deal  with  a  statistical  contrast  of  (he 
growth   of  California   and   Ontario. 


Comparison  of  Rural  Power  Costs 

To  go  into  further  detail,  it  will  I*  interesting 
to  compare  the  cost  of  electric  energy  to  California 
farmers    as    compared     to    the 
proposed  cost  in  Ontario,  even 
though  the  government  of  On- 
tario itself  proposes  to  meet  one- 
half  the  expense  of  this  service. 
In  small   hamlets  the  Commis- 
■■!■— a»  i iJ    sion  will  now  be  able  to  supply- 
domestic    service    for    lighting, 
appliances,  etc.,  for  $23.00  per  year.     For  lighting 
homes,  other  than  farms,  on  highways  adjacent  to 
lines,  and  including  use  of  appliances,  the  service  can 
be  supplied  for  $39.00  per  year.    Energy  to  operate 
a  3-hp.  motor  or  range,  including  service  for  lighting, 
irons  and  toasters,  can  be  supplied  to  a  farm  house 
*  for  $86.00  per  year,  while  a  10-hp.  motor,  including 
lighting  and  appliances,  can  be  supplied  on  a  farm 
for  $220.00  per  year. 

Note  what  is  already  being  done  in  California 
where,  it  must  be  repeated,  the  use  of  electricity  on 
the  farm  is  unsurpassed.  In  small  towns  on  one  of 
the  great  power  systems  of  California  the  average 
bill  for  lighting  and  ordinary  appliance  use  does  not 
exceed  $20.00  per  year.  For  the  same  class  of  serv- 
ice on  rural  lines  the  average  bill  will  not  exceed 
$24.00  per  year.  A  3-hp.  motor  or  range,  including 
service  for  lighting,  irons  and  toasters,  can  receive 
service  from  a  typical  power  system  for  approxi- 
mately $50.00  per  year,  the  minimum  charge 
amounting  to  $38.00  per  year.  Service  can  be  sup- 
plied from  this  same  system  for  a  10-hp.  motor. 
including  lighting  and  appliance  use.  for  approxi- 
mately $120.00  per  year,  the  minimum  guaranteed 
being  not  less  than  $90.00  per  year. 

It  is  difficult  to  get  an  equitable  comparative 
statement  of  cost  of  service  to  agriculture,  indi. 
and  home,  since  the  physical  situation  in  Ontario 
and  in  California  is  entirely  different.  The  major 
portion  of  power  in  the  Ontario  system  is  derived 
from  Niagara  Falls  and  transmitted  over  level  coun- 
try comparatively  short  distances.  In  California,  on 
the  other  hand,  the  plants  are  located  in  the  high 
mountains,  often  hundreds  of  miles  from  the  market 
for  the  power,  necessitating  the  construction  of 
many  storage  dams  and  power  houses  and  long  trans- 
mission  lines  over  extremely  rugged  country.  Fur- 
thermore, the  water  supply  in  California  is  not 
continuous,  and  it  is  necessary  to  supplement  the 
water  fa  power.    Then,  again,  taxes  in  the 

state  of  California  are  in  a  large  measure  raised 
from  her  public  utilities,  while  in  Ontario  the  taxes 
paid  by  the  Hydro  Commission  are  insignificant  in 
comparison. 


12 


Journal  of  Electricity  and  Western  Industry 


I  think  it  may  fairly  be  stated  that  the  building 
of  giant  dams  for  storage  reservoirs  and  the  main- 
taining of  steam  standby  service  in  California,  due 
to  fluctuating  stream  flow  in  the  mountains,  necessi- 
tates an  extra  installation  expense  of  from  15  to  20 
per  cent  over  the  installation  expense  in  the  Province 
of  Ontario.  And,  again,  the  extra  cost  involved  in 
the  construction  of  long  distance  transmission  lines 
over  hazardous  mountain  passes,  and  the  extra 
energy  losses  in  long  distance  transmission  in  Cali- 
fornia, in  comparison  with  the  average  short  line 
transmission  losses  involved  in  the  Province  of 
Ontario,  with  its  comparatively  level  country,  should 
reasonably  involve  an  additional  10  to  15  per  cent 
cost  for  service  in  California  over    and  above  the 


TORONTO  BATES 

COMPARATIVE  CITY  RATES,  ONTARIO  AND  ELSEWHERE  • 

The  only  Ontario  figures  which  are  given  in  a  form  possible  of  comparison 
are  the  city  rates.  These  show  that  at  the  present  time,  both  Buffalo 
across  the  border  and  Montreal,  the  leading  city  in  the  adjacent  province 
of  Quebec,  enjoy  lower  rates  under  privately  owned  companies,  than  does 
Toronto  under  the  Commission.  In  Toronto  itself,  the  rates  of  the  privately 
owned  company  in  competition  with  the  Hydro  Electric  Commission  are  the 
lower  of  the  two. 

costs  involved  in  the  hydroelectric  development  in 
the  Province  of  Ontario.  In  addition,  the  state  and 
federal  taxes  paid  by  California  utilities  is  between 
71/2  and  11  per  cent  of  their  gross  income  and  ex- 
ceeded five  million  dollars  in  1920.  In  the  Province 
of  Ontario  only  a  small  fraction  of  this  amount  is 
involved,  amounting  to  less  than  $115,000  in  1920. 
In  any  just  comparison  of  cost  of  electric  service  in 
California,  as  compared  with  rates  charged  in  the 
Province  of  Ontario,  it  would  seem  obvious  that 
California  costs  of  hydroelectric  development  per 
horsepower  should  exceed  those  of  the  Province  of 
Ontario  by  from  30  to  40  per  cent,  and  consequently 
charges  for  service  might  reasonably  be  expected  to 
be  proportionately  high. 

Most  of  the  available  power  sites  in  California 
are  scattered  along  almost  inaccessible  mountain 
streams  with  comparatively  small  amounts  of  power 
available  at  each  site.  A  comparison  of  the  average 
California  development  of  around  20,000  hp.  with 
the  single  development  of  500,000  hp.  of  the  Chip- 
pawa  plant  of  the  Hydro  Electric  Power  Commission 
clearly  indicates  how  unit  hydroelectric  costs  per 
horsepower  in  California  should  at  times  exceed 
those  at  Niagara,  from  100  to  200  per  cent,  depend- 
ing upon  the  conditions  surrounding  the  develop- 
ment. The  maintenance  of  a  necessary  steam  auxil- 
iary service  is  a  handicap  which  may  double  the 
operating  costs  in  California  compared  with  the  con- 
tinuous water  supply  of  Niagara. 

A  mere  comparison  of  a  few  rates  for  power 
service  in  the  Province  of  Ontario  with  a  few 
instances  in  California  does  not  in  any  way  conclu- 

sivplv    nrnvp    rhp    nHvnntno-p    nf    nnp    river   trip    nrhpi- 


Partisans  defending  either  side  of  the  issue  often 
seek  to  convince  the  listener  by  this  method  which 
is  extremely  dangerous  and  misleading. 

The  Only  Correct  Basis  of  Comparison 

No  individual  comparison  of  rates  can  be  made 
between  California  and  Ontario  since  the  rate- 
making  methods  employed  in  Ontario  have  resulted 
in  a  widely  varying  cost  of  power,  placing  at  a  dis- 
advantage those  municipalities  which  are  not  near 
the  source  of  power  or  near  the  main  lines  of  the 
systems.  In  California  it  is  the  aim  to  equalize  costs 
and  not  penalize  the  more  distant  consumers  by 
pyramiding  the  cost  to  them  simply  because  of  dis- 
tance from  source  of  supply. 

While  both  in  California  and  in  Ontario  power 
is  sold  to  consumers  at  cost,  in  California  "at  cost" 
include  taxes,  and  a  fair  return  on  the  investment. 
In  Ontario,  taxes  are  eliminated  on  electric  utility 
property,  excepting  land.  While  the  relief  from 
the  payment  of  taxes  permits  the  government  elec- 
tric utilities  in  Ontario  to  reduce  their  costs  for 
power  by  a  corresponding  amount,  this  only  results 
in  a  transfer  of  the  costs  from  the  power  consumer 
to  the  taxpayer,  whether  or  not  the  taxpayer  is  a 
power  consumer. 

Despite  all  these  conditions  making  for  cheaper 
power  in  Ontario  the  fact  remains  that  the  power 
rate  in  California  averages  equal  to  or  below  that 
of  Ontario. 

The  only  fair  and  economic  method  of  compari- 
son is  to  take  the  sum  total  of  electrical  energy 
delivered  to  California  consumers  and  divide  this 
total  into  the  total  money  received  for  this  service, 


No  Public  Capita!  Invested 


A I    Public  Expense. 


Qsm  to  people  of  Ontario  in 
rale  reductions .    ' 


Gain  to  people  of  California  in 
rate  reductions, 


THE   SAVINGS   TO   CONSUMERS  IN   RATE   REDUCTIONS 

Dividends  to  the  people,  according  to  advocates  of  the  Ontario  Commission, 
may  fairly  be  reckoned  in  terms  of  money  saved  over  a  given  period 
through  rate  reductions — and  they  point  to  the  68  millions  which  were 
saved  to  the  people  of  Ontario  in  ten  years'  time.  In  California  under 
private  companies  publicly  regulated,  the  saving  amounted  to  $192,966,000, 
or  something  like  three  and  one-half  times  the  Ontario  amount.  This 
further  is  without  any  investment  or  risk  to  public  funds. 

and  thus  get  the  actual  selling  price  for  electrical 
energy  per  unit  of  energy  sold.  Next,  compare  this 
basic  unit  with  a  unit  charge  for  service  similarly 
computed  from  the  Ontario  method  of  development, 
after  allowing  for  the  differences  in  development 
hazards  experienced  in  one  district  and  not  experi- 
enced in  the  other,  and  a  proper  allowance  for  the 
light  payment  of  taxes  in  the  one  community  and 
the  heavy  payment  of  taxes  in  the  other. 

In  a  recent  letter  from  the  chief  engineer  of 

thp    T-TvHvn    Fllpptrin    Pnwpv    Clnmmissinn    nf   Ontario. 


n.u.  of  Electricity  and  Western  Industry 


I  :im  advised  that  these  general  figures  are  not  avail- 
able for  Ontario.  In  other  words,  the  Commission 
has  never  gathered  this  important  statistical  data. 
A  cartful  study  of  available  data,  assuming  a  load 
factor  similar  to  that  prevailing  in  adjacent  terri- 
tory, both  in  the  United  States  and  Canada,  however, 
reveals  the  fact  that  the  average  charge  to  consumer 
on  the  Ontario  system  is  2.04c.  per  kilowatt-hour, 
(lolivered  to  the  city  distribution  mains.  If 
the  same  methods  of  accounting  were  used  by  the 
Hydro  Electric  Power  Commission  as  are  prescribed 
t>y  the  California  Railroad  Commission,  this  figure 
would  read  2.33c.  Assuming  a  25  per  cent  loss  in 
the  city  distribution  system  the  average  city  rate  in 
Ontario  to  the  ultimate  consumer  is  three  cents,  or 
over,  which  is  the  same  general  average  that  prevails 
in  California  cities.  In  California,  on  the  other  hand, 
the  average  charge  to  consumer  of  all  energy  sold 
is  1.95c.  per  kilowatt-hour,  or,  deducting  the  amount 
paid  in  taxes  (which  is  not  represented  in  the  On- 
tario rate),  1.751/oc.  per  kilowatt-hour.*  The  Cali- 
fornia rate  quoted  above  was  obtained  from  1921 
figures  and  would  be  even  lower  during  normal  times 
when  industrial  demands  with  their  low  rates  would 
further  reduce  the  average  rate. 

The  average  rate  which  is  quoted  above  for  Cal- 
fornia  of  1.95  cents  per  kw-hr.  is  computed  from  the 
following  records  of  the  California  State  Railroad 
Commission.  Although  there  are  approximately 
forty  companies  supplying  electric  service  in  Cali- 
fornia, these  companies  produce  eighty  per  cent  of 
the  power  sold  in  California. 

•Thu  tax-fraa  rate  baromaa  l.»4  nnli  par  kw-hr.  when  uln  of  wholaiato 
powar   »r*    not   ronaidarad. 

RATI  HAllHnui  COMMISSION  BSCOKM 

Calanaar    Yaar    ltll 

Kw-hr.  Sate*  Kavrnu* 

Pacific  Gu  u4  EWrtric  Company ..   1.021. S20.SS*  |21.8»8.044.»2 

liraai    Wasters    Powar    Company 340.040.3(1  S.»47.710.7J 

Joaquin    l.l«ht   4%    Powar  Corporation SlS.7tl.8U  &.0M4.7S0.8* 


Regarding  Mythical  Savings 
Rate  comparisons  made  under  any  other  basis 
than  that  of  general  averages  in  costs  to  the  ulti- 
mate consumer  after  taking  into  consideration  all 
the  varying  factors  involved  are  deceptive.  This 
same  fallacy  in  reasoning  can  creep  into  the  discus- 
sion in  instances  other  than  rates  charged.  To  give 
an  example  of  how  easy  it  is  to  lay  claim  to  great 
savings  when  in  reality  these  savings  should  be 
credited  to  the  march  of  progress  and  invention.  I 
would  call  attention  to  another  statement  of  the 
speaker  at  the  Riverside  meeting.  In  speaking  of 
the  rate  reductions  claimed  by  the  more  economic 
operation  of  the  Hydro  Commission,  he  said: 

"If  the  rates  are  reduced,  and  the  consumer  pays  leas 
for  the  service  he  received,  that  reduction,  I  maintain,  is  the 
consumer's  dividend,  just  as  much  as  if  a  check  were  handed 
to  hum  by  the  municipality  each  month  for  the  amount  erf 
the  reduction  in  his  power  and  lighting  bills  for  the  service 
which  he  receives,  and  for  the  current  used  for  lighting  alone. 
Since  the  hydro  municipalities  first  began  to  operate,  the 
saving  in  rates  charged  over  what  would  have  been  paid  at 
the  old  rates  amounts  to  over  $38,000,000.00  and  at  least 
$20,000,000.00  more  on  power  used,  or  a  total  of  over  $58,000,- 
000.00  paid  to  the  users  of  power  and  light,  the  shareholders 
in  the  scheme  in  ten  yearn*  operation,  five  of  which  were 
fraught  with  unprecedented  difficulties  created  by  the  greatest 
economic  upheaval  the  world  has  ever  witnessed." 

I  am  wondering  who  will  lay  claim  to  the  fabu- 
lous saving  in  power  bills  that  has  been  accomplished 
in  California  since  1907  when  the  average  rate  paid 
for  power  generated  was  2.15  cents  per  kilowatt- 
hour,  according  to  the  U.  S.  Census,  which  rate,  ac- 
cording to  the  same  source,  was  reduced  to  1.55  in 
1912  and  1.45  in  1917,  being  raised  again  to  1.55  in 
1921.  Using  the  same  line  of  reasoning  of  the  above 
speaker  it  is  evident  that  the  people  of  California 
have  been  paid  in  dividends  in  the  form  of  reduced 
rates  under  the  method  of  utility  regulation  that 
prevails  in  that  state  the   gigantic   total  of  $1 


California 


*•/<«>.       -2.22* 


Total 


*rr3?j+,*o* 


.    Mt.0Sl.tl0       1S.O74.4S0.O0 

ybb.m.ru.i 

n),  as  esiimaiea  in  me  iohuv 

n  un  i  b  \\  lms 

nig  utnuinin 

2.IU.7S4.00S     S4S.00S.0IS.U 

Powar  Ganaratarl 

Rata  Sattac 

la  Million*  of 

Kw. 

Dollar* 

Yaar 

Kilowatt-Hour* 

la  Caate 

.-a,*"! 

■■■*fpsx*^,,  1^34 

1921 

MM 

.6 

mjMjm 

L9S0 

3,661 

.66 

23400.000 

....*mt-»* 1  TSii 

LM9 

3,311 

rW 

8tJ8S490 

1918 

3,037 

411 

20.500.000 

1917 

2,783 

.69 

19,400,000 

1916 

MM 

«•.:;. 

11449499 

1915 

2468 

rtf* 

M.  450,060 

191 1 

|  (rj:, 

.66 

1S.160.000 

1919 

1,901 

SM 

11.890.000 

1!»1J 

1.663 

.6 

9410400 

1911 

1.401 

.6 

Tjnai.tx*' 

1910 

1.208 

.4 

4430.000 

1909 

1,060 

l»:. 

I494499 

I9M 

MS 

.16 

1.-40.000 

Total  Estimated  Saving.    $192409400 


cost  or  rows*  to  tsb  t  ltimatk  i  cmisiiw 

Tha  inrtfi  teat  of  powar  to  to*  ultimata  naojmr  la  tha  rlttoa 
Oatarlo  oar  kw-hr.  aVtlaan*  to  tha  rite  *atrtawtioa  a|  ilna.  hlNm 
War*  araoaatlaa,  teathoa*  la  tha  flrurlnc  of  aaiiiilallua  aaal 
for  tha  Proalar*  of  Oatarlo  moaV  to  roafona  to  laoor  la  affart  la 
uadar    1  a  1  mil ulun  raaajaUoa.  thl.  atrara  ahoata   rwaa  1.1s   raate  for 

in  •Mtaarla*  tola  nan    to  tha    roaaianr.   Uto  a< 

about  thra*  raat*.   which   to 

Uh>  rttto*  of   California.     Oa 

aaUra  aala  of  powar  frooj  four  torso  waaaalai  of 

to  I.M  caate  par  kw.hr 


-1 _# 


Despite  the  fact  that  a  dispassionate 
tion  of  both  rates  and  service  reveals  the  advantages 
of  the  privately  owned  and  publicly  regulated  Cali- 
fornia system,  in  comparison  with  the  government 
owned  and  controlled  system  of  Ontario,  nevertheless 
there  are  those  who  would  bring  about  similar  condi- 
in  California  through  the  adoption  of  the  pro- 
posed Wster  and  Power  Act.     It  is  most  important 


14 


Journal  of  Electricity  and  Western  Industry 


How  California  has  Outdistanced  Ontario  in  Economic  Growth 

A  Statistical  Comparison  of  Growth  During  the  Past  Twenty  Years  Indicates  that 

California  has  Developed  Remarkably  Under  Private  Initiative  while 

Ontario  Has  Been  Retarded  by  Government  Ownership 


PROPONENTS  of  the  proposed  Water  and  Power 
Act,  the  initiative  measure  to  be  passed  upon  by 
the  voters  of  California  at  the  election  in  No- 
vember, 1922,  cite  as  an  example 
of  the  benefits  of  government 
ownership  the  results  obtained 
in  the  Province  of  Ontario, 
Canada,  where  government  own- 
ership and  operation  of  hydro- 
electric energy  has  been  in  force 
for  the  past  twenty  years.  In 
fact,  the  proposed  California  scheme  is  modeled  upon 
the  Ontario  plan,  the  economic  sanity  of  which  is 
questioned  by  many  prominent  engineers.  The  suc- 
cess of  the  Ontario  scheme  is  declared  to  be  "phe- 
nomenal' by  its  advocates,  but  viewed  in  the  light 
of  the  accomplishments  of  twenty  years  and  com- 
pared with  the  progress  of  California  during  the 
same  period  of  growth,  the  latter  district  is  seen  to 
have  surpassed  Ontario  in  agriculture,  commerce 
and  industry. 

In  fact,  statistical  comparisons  throughout  the 
twenty-year  period  since  Ontario  assumed  the  yoke 
of  government  ownership  show  unmistakably  the 
effect  of  the  superiority  of  private  initiative,  soundly 
regulated. 

Prior  to  the  publication  of  the  1920  census 
reports  California  had  never  been  regarded  nation- 
ally as  a  great  manufacturing  state,  but  the  returns 
showed  this  state  to  be  the  fifth  state  in  number  of 
industrial  establishments  and  eighth  in  value  of 
manufactured  products.  From  the  statistical  data 
accompanying,  it  will  be  seen  that  California,  while 
having  less  capital  invested  has  a  greater  value  of 
manufactured  products. 


giniiiiiiiiiiiiiiiiiiiiii iiinniiiiiiiiiiii i :  1 1 1 1 : 1 1 1 iiiiiiiiiiiiiiiiiniiiiiiiiimiiiiiiiiiiiuuiiiiiiiiiiiiiiiiiiiig 

np  HIS  article  is  the  third  of  a  series  of  three 
I    based  upon  a  personal  investigation  by  Mr. 
Sibley    of    the    results    of    twenty    years    of 
government  ownership  and  operation  of  hydro- 
electric power  in  the  Province  of  Ontario.  The 
two   previous  articles  dealt  with  physical  com- 
parisons   and    rate    charges    in    California    and 
j§      Ontario. 
a iiiiiiiiiiiiiiiiiiiiiiiiiiiniiii niiiiiiiiiiiiiiiii iiiiiiiiiiiiini iiiiiiniiiiiiiiiiiiiiiiiiiiiii mini 3 


MANUFACTURING    AND    INDUSTRIES 


ONTARIO* 
Year  Number 

1905  6.163 

1910  8,000 

1915  6,538 

1918  15,365 


Capital  Invested 
215,000,000 
391,000,000 
947,000,000 

■    1,508,000,000 


•Reference:    "Canada   Year   Book    1920.' 

CALIFORNIA  :* 

1904                      6,838  283,000,000 

1909                      7,659  537,000,000 

1914                     10,057  736,000,000 

1919                     11,943  1,333,000,000 

•Reference:    "U.  S.    Census." 


Value  Product 
241,500,000 
361,372,000 
680.000.000 

1,809,000,000 


367,000,000 

530,000,000 

713,000,000 

1,981,000,000 


Persons 
Employed 
184,000 
239,000 
244,000 
334,000 


120,000 
142,000 
177,000 
297,000 


Note  on  the  accompanying  chart  California's 
wonderful  growth  in  population  as  compared  with 
Ontario.  California  starts  the  century  with  25  per- 
cent less  population  and  winds  up  the  double-decade 
with  21  per  cent  greater  population,  or  over  600,000 
more  people  than  the  Province  of  Ontario. 

No  section  of  country,  no  matter  what  its  indus- 
trial progress  may  be,  can  endure  without  develop- 


happened  in  the  double-decade  under  consideration? 
California  starts  out  with  707,000  and  in  1920  has 
over  a  million  in  her  rural  communities.  Ontario,  on 
the  other  hand,  had  in  1901  al- 
most one  and  one-fourth  million 
people  in  agricultural  districts. 
This  number  declined  to  one  mil- 
lion in  1920,  a  decline  of  almost 
20  per  cent. 

And  what  are  the  compara- 
tive statements  of  the  value  of 
crops  in  this  double-decade  period  ?  In  twenty  years 
California  crops  increased  in  value  344  per  cent, 
while  the  increase  in  Ontario  was  only  240  per  cent. 

$1,381,000,000 

—.tl,  809.000.000. 


$367,ooo,ooo-$2l5oOQ>000 

P      □ 

California     Onfario 
IS  04- 1905 


California    Onfario 
/ 9 1&  &  1-9 


VALUE      OF     MANUFACTURED      PRODUCTS 

A  comparison  of  the  number  of  livestock  shows 
that  in  California  livestock  increased  in  value  230 
per  cent,  while  Ontario  increased  only  51  per  cent. 

A  comparison  of  farm  values  which  is  graphic- 
ally illustrated  in  the  chart  on  the  next  page  shows 
that  the  value  of  farm  implements  increased  540  per 
cent  in  California  and  only  85  per  cent  in  Ontario. 
Similarly,  farm  buildings  increased  278  per  cent  in 
California  and  only  37  per  cent  in  Ontario.  A  strik- 
ing increase  is  shown  in  land  values  in  California,  a 
percentage  increase  of  342  per  cent,  while  Ontario 
values  increased  but  40  per  cent. 


<2s£°2 


ONTARIO  CALIFORNIA 

1900   -    1901 


ONTARIO  CALIFORNIA 

1919   -  1920 


Jfc 


*i  tv  i '  i  n  1 1 


Journal  of  Electricity  and  Western  Industry 


During  the  twenty  years  under  discussion  farm.- 
as  a  whole — land,  buildings,  implements,  livestock — 
increased  in  California  l>y  :'>:'. 1.5  per  cent,  with  only 
an  increase  of  63.2  per  cent  in  Ontario,  as  indicated 
by  the  following  tabulation: 


FARM    >  A  I  I   k>- 
IFuKNIA  Land 

TtAal  J  Implement* 
'.  LWeatork 
1000  IN*  %  1*01 

TOO.JI 1.000         (.4S1.000.000       M1.6  1.001.000.000 

•Hrtrrmcr:  "Heaton'i   Annual    1021." 
S.    On.u,    1000-1020." 


ONTARIO 


1010 
Um.0M.0ll 


M.2 


Finally,  what  has  happened  to  the  number  of 
-  in  this  period?    In  California  they  increased 


California 
Ontario 


Crops 


C 


H 


Livestock 
California      i  i 

Ontario  D 

Implements 


California      i  : 

Ontario  CD 

Bui :  Idinqs 

California       i  i 

Ontario  D 

Land 
California       \  D 

Ontario  □ 


344 
240 

230 
51 

640 
85 

278 
37 

342 

40 


l'IK'l\Hl.l     IMHKIM      IN     IIIIN     »   VI  IKS     1*1*    OVER    1010 

by  62  pat  cent,  while   in   Ontario   they  actually  de- 
.  i.M-.d  j i  par  <  • 

And  what  effect  does  this  method  of  thinking 
haw  upon  the  funded  debt?  California  today  has 
only  a  funded  debt  of  $1 1.67  per  capita,  while  On- 
tario has  $40.. M. 


>->o 


-Pe 
California  \ 

Ontario- 


ncreasc  - 

J 331.3 


632 


191* 

ion 

1018 
1010 
1020 


ALL    FARM    VALIES    1000-1*20 

BUILDING  PERMITS- 
IS  Principal  ClUaa 
CALIFORNIA 

S4.000.000 

SI  .000.000 

■■-  07.000,000 

140.000.000 
■Reference:  "Canada  Year  Book   1020." 
"Bradstreef*   1010   to   1020." 


li  Principal  Otiaa 
ONTARIO 

IT.HI.000 

21.4T7.000 


4T.1T0.OOO 


And  all  this  affects  the  financial  borrowing 
power  of  a  commonwealth.  Note  Ontario's  1921  rat* 
of  6.25  compared  with  California's  rate  of  4.50 
which  has  recently  dropped  to  4.25  per  cent. 

INTEREST    RATES 
Bands  *f  Pra,  lar*  af  Ontaria       Of  Slat*  af  i  alifi 
1010 
1011 

1012  

1011 
1014 

1010  

1010 
101? 
I01S 
1010 

1*21 


a.00 

i.oo 

4.00 

X.40 

4.00 

a.  4* 

4.40 

«.*0 

4.00 

*.»• 

4.00 

1.40 

0.00 

S.M 

(-•0 

XM 

coo 

4.20 

%m 

4.00 

(.00 

4-00 

0.2S 

4-00 

ONTARIO 

PER     CAPITA     riNOKU     DEBT 


Turning  from  the  farm  to  building  in  general. 
what  i-  the  situation"  Fifteen  of  California's  fore- 
most cities  had  a  building  record  of  $140,000,000  in 
VX1"  compared  with  Ontario's  $17. 17 '..000,  and  the 
1921  record,  from  such  statistics  as  we  have  avail- 


CAuronNiA 


in  ir REST    RATES   ON    STATI    BONE 


It  is  little  wonder  then  that  the  twenty-yew 
period  ends  with  California  having  an  assessed  valu- 
ation of  $4,555,000,000  as  compared  with  Ontario's 


16 


Journal  of  Electricity  and  Western  Industry 


In  conclusion  it  is  to  be  remembered  that  Cali- 
fornia's remarkable  record  of  accomplishment  in  in- 
dustrial, agricultural  and  commercial  growth  has 
been  one  of  marked  individual  accomplishment.  In 
this  twenty-year  period  California  has  become  noted 
for  her  great  cooperative  selling  organizations,  yet  it 
is  doubtful  if  anywhere  in  the  world  can  there  be 
found  a  district  where  individual  initiative  has  re- 
ceived more  direct  encourage- 
ment and  yet  where  rigid  control 
of  public  utility  regulation  has 
advanced  to  such  high  stand- 
ards. The  eyes  of  the  nation 
have  constantly  been  focused  on 
California  in  observing  her  prog- 


818,  OOO  hp. 


1,150,000  h  p. 


60.000  b p. 


500.  ooobp. 


Ontario    California       Ontario    California 


A  dual  Hew  Construction 
1910-  I9?0 


Actual  Planned 
Construction. 
IS?0- 1930. 


HYDROELECTRIC    CONSTRUCTION,    ACTUAL    AND    PLANNED 

ress  in  public  utility  evolution  throughout  this  as 
well  as  many  other  outstanding  accomplishments. 
I  do  not  wish  to  be  understood  as  saying  that 
California  has  advanced  so  far  that  perfection  has 
been  reached.  Far  from  it.  I  fully  realize  that  our 
great  utility  companies  must  be  led  to  higher  and 
higher  ideals  in  service  to  the  public.  They  must 
vastly  simplify  their  present  rate  schedules  so  that 
the  man  in  the  street  may  understand  how  his 
charges  for  electric  service  are  determined.  The 
hand  of  our  railroad  commission  must  be  vastly 
strengthened.    It  must  be  made  the  equal  in  dignity 


California] 
£140,000.000 

IOO.OOQOOC 

£0  OOO  OOO 

On  Is  no— 
H-5,000^ 

$47, 

Fo.ooo.ooo 

Ltf^ 

3 


N. 

?5 


5 


5 

S 


9> 


and  authority  of  any  other  judiciary  body  in  our 
commonwealth.  Valuations  given  to  installation  and 
service  costs  must  be  most  carefully  scrutinized  by 
citizens  generally,  and  to  this  end  citizens  in  local 
communities  throughout  the  state  must  be  encour- 
aged to  look  into  and  constantly  follow  rate  charges 
and  valuations  as  they  progress.  In  order  to  facili- 
tate this  informal  checking  on  the  part  of  our  citi- 
zens, the  data  and  processes  by  which  these  valua- 
tions are  arrived  at  must  be  made  more  and  more 
accessible  to  any  citizen.  Again,  the  greatest  pres- 
sure must  at  all  times  be  placed  upon  these  utilities 
to  force  them  to  exert  every  effort  possible  to 
deliver  electrical  energy  to  our  citizens  with  ever- 
increasing  economies  in  production.  Above  all,  a 
reasonable  financial  return  must  be  assured  not  only 
to  those  who  invest  their  money  in  these  enterprises, 
but  that  great  body  of  workers  now  approaching 
twenty-five  thousand  in  the  state  of  California  who 
are  engaged  in  operating  these  utilities  must  be 
given  reasonable  reward  for  initiative,  service  and 
skill  they  display  in  delivering  electric  power. 

Another  fundamental  objection  to  government 
operation  and  ownership  of  any  enterprise  is  the 
tendency  to  stifle  and  retard  progressiveness  and 
ambition  on  the  part  of  employes,  as  well  as  breed  a 
sense  of  indifference  on  the  part  of  the  public  as  to 
how  their  enterprise  is  being  conducted.  Eternal 
vigilance  is  truly  the  only  guarantee  of  good  gov- 
ernment. 

Let  us  not  unwittingly  place  our  vast  develop- 
ment problems  under  a  method  of  control  under 
which  it  will  be  difficult  for  citizens  to  exert  this 
guarantee  of  eternal  vigilance — under  a  method  that 
has,  to  say  the  least,  proven  in  the  Province  of  On- 
tario questionable  in  economic  attainment  after 
years  of  fair  and  honest  trial.  But  rather  let  us  place 
California's  development  under  the  severest  type  of 
public  regulation  with  full  play  of  initiative  given  to 
those  who  engage  in  this  work,  and  yet  with  the  one 
sound  and  sane  safeguard  of  her  progress  ever  ready 
to  be  brought  to  bear,  namely,  the  "eternal  vigi- 
lance" of  an  intelligent  and  well-informed  public. 


COMPARATIVE 
ACTUAL 
SIZE 


BUILDING    PERMITS— 15    PRINCIPAL    CITIES    IN    CALIFORNIA 


A  o  r\^A.  nrsr>  «-><*ii~> 


COMPARATIVE 

SIZE 
ACCORDING 
TO  ASSESSED 
t.      VALUATION 
itco 


RETURN  TO  the  circulation  desk  of  any 
University  of  California  Library 
or  to  the 
NORTHERN  REGIONAL  LIBRARY  FACILITY 
Bldg.  400,  Richmond  Field  Station 
University  of  California 
Richmond,  CA  94804-4698 


ALL  BOOKS  MAY  BE  RECALLED  AFTER  7  DAYS 
2-month  loans  may  be  renewed  by  calling 

(415)642-6233 
1-year  loans  may  be  recharged  by  bringing  books 

to  NRLF 
Renewals  and  recharges  may  be  made  4  days 

prior  to  due  date 


U  C  MRM16YI 


II 


C0S7073302 


